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Go off on one: UK inflation rate

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    • CommentAuthorDavid
    • CommentTimeAug 7th 2006
     

    Now, I'm no economist so I have a limited understanding of such things. Can someone explain in layman terms how we get to some overall rate like 2.7% which will no doubt be what is cited to me at my next pay rise, when the things I actually pay for like London Underground was in excess of 10% in some cases 20%, and gas & energy is approaching 30%?

    Why can't i get a 30% pay rise?

    • CommentAuthorandy
    • CommentTimeAug 7th 2006
     
    because people in china work for food.

    so the cost of manufactured goods, clothes and other things have gone down in real terms over the last ten years

    Shopping on the internet has caused price competition in areas where it didn't exist before

    HOWEVER, in order to hit the 2% target, the basket of goods must include things that go up in price.

    Stuff that has increased in price is i) locally delivered ii) a fixed unit labour cost.

    Therefore haircuts have gone up in price more than anything in the UK over the last five years.
    • CommentAuthorDavid
    • CommentTimeAug 7th 2006
     

    Nope. Still struggling. It all feels rather abstract and arbitrary to me still (I appreciate it obviously isn't).

    Import stuff is cheaper. Local stuff cost more. But then that middle line loses me. An abitraty 2% target and a basket that must include things. Too much or too little of what would raise or lower that inflation rate?

    Sorry for this.

    • CommentAuthorandy
    • CommentTimeAug 7th 2006
     
    http://business.timesonline.co.uk/article/0,,16849-2291868,00.html

    http://personalfinance.iii.co.uk/articles/articledisplay.jsp?section=Tax&article_id=2643777

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