Is UK inflation becoming a worry?
Discussion
You will have noticed that for a long time, UK governments use the Consumer Price Index for their main inflation communications, although they still like the Retail Price Index for some taxes they receive.
You know why. Increase benefits and pensions using CPI, but for taxes received it is RPI.
The records that I keep remain RPI.
By monitoring the previous 6 months, then multiplying by 2, that can provide an indication of the immediate future trend.
In January 2025, the 6 months (x2) = 2.2%. - - - - - 12 months = 3.6%.
Subsequent 6 month figures have been;
Feb = 2.1%
Mar = 3.4%
Apr = 5.9%
May = 6.1%
Jun = 6.3%
In July 2025 .......the 6 months (x2) = 7.4%. - - - - - 12 months = 4.8%.
I wonder how long this inflation increase will continue?
ooid said:
Between 2014-2019, Inflation averaged 1.5% a year.
Between 2019-2024, Inflation averaged 4.4% a year.
According to CPI*
Last budget, definitely did not help with the inflation!
Between 2019-2024, Inflation averaged 4.4% a year.
According to CPI*
Last budget, definitely did not help with the inflation!
Thank you all for joining this discussion.
Any seniors amongst us will remember the 1970s.
RPI exceeded 20%.
High inflation can occasionally help;
People with mortgages;
Provided they kept their job and secondly could afford the higher mortgage interest payments.
The mortgage debt reduces in monetary value.
Governments;
Debt reduces in monetary value.
For many others, high inflation is awful.
One aspect is the diminishing value of cash savings.
ATM said:
Me again
Just checking we all know banks create money. Every time they create a loan it s new money. This is how the money supply has changed since 1997. Yes there is over 3 times as many pounds now as there was in 1997. Most were created by Banks and someone is paying interest on all of those to a bank.
https://www.ons.gov.uk/economy/grossdomesticproduc...
Just checking we all know banks create money. Every time they create a loan it s new money. This is how the money supply has changed since 1997. Yes there is over 3 times as many pounds now as there was in 1997. Most were created by Banks and someone is paying interest on all of those to a bank.
https://www.ons.gov.uk/economy/grossdomesticproduc...
When reading your post, I wondered how the value of money has changed during that same time period.
Money supply;
Using the chart scale, about 1,000,000 to 3,000,000.
Inflation (RPI);
1,000,000 to 2,650,000
PlywoodPascal said:
Jon39 said:
You will have noticed that for a long time, UK governments use the Consumer Price Index for their main inflation communications, although they still like the Retail Price Index for some taxes they receive.
You know why. Increase benefits and pensions using CPI, but for taxes received it is RPI.
The records that I keep remain RPI.
By monitoring the previous 6 months, then multiplying by 2, that can provide an indication of the immediate future trend.
In January 2025, the 6 months (x2) = 2.2%. - - - - - 12 months = 3.6%.
Subsequent 6 month figures have been;
Feb = 2.1%
Mar = 3.4%
Apr = 5.9%
May = 6.1%
Jun = 6.3%
In July 2025 .......the 6 months (x2) = 7.4%. - - - - - 12 months = 4.8%.
I wonder how long this inflation increase will continue?
What is the figure you are multiplying by 2 and why are you multiplying it by two?
Is it the annual inflation rate that s published each month?
Or is a 6 month inflation rate published monthly also?
Don t forget there are repetitive seasonal variations in inflation, too.
If you are converting a rate for 6 months then you need (decimal rate+1)^2 - 1 to calculate the annual rate btw.
Hello PP.
Just in case you are a mathematician, I had better start by saying that my method might not be entirely mathematically correct, but on many occasions it has certainly provided a clue to the future direction of inflation.
Using the monthly Retail Price Index figures. The actual figures, not the 12 month CPI percentages that are publicised.
Latest month number, minus the 6 month back number, divided by the 6 months back number, then times 100.
That gives the percentage change over the previous 6 months.
I then multiply that by 2 to make it annualised.
When inflation is beginning to head up or down, the past 6 months will give a more up to date picture than the past 12 months.
You can run a chart of those two figures, which can be a good trend indicator at times, as one line crosses over the other line.
One funny thing when inflation figures are announced (especially by the 'experts' at the BBC) are the reasons for increase or decrease.
They might say the increase is due to food prices or fuel prices. Take a look at the months figure being dropped out of the 12 month window. Sometimes that month is a tiny percentage compared to perhaps a slightly bigger increase in the latest month. So it is not what they say, but more due to the particular figure that has been dropped out of the 12 month calculation.
Edited by Jon39 on Monday 15th September 11:54
mikeiow said:
... Well, mine is to continue to invest in a broadly global set of stocks - they seem to be still going okay, but the odd crash is perfectly normal in the cycle of investments.
I agree entirely Mike, and history proves us to be correct.
During the height of the pandemic, I did wonder though, whether the end of business and capitalism might be about to happen, but decided to risk increasing holdings at the lower prices. Fortunately clever scientists (many British) developed vaccines which seemed to help normality return. If the end had come, I suppose buying more stocks would not have made any difference. We would all have been ruined anyway.
There is another aspect regarding shareholding and inflation.
Businesses in some sectors are able to increase their prices, without sales declining. Non cyclical essentials.
Discretionary purchase businesses are in a more difficult situation during high inflation. If they cannot increase prices and obviously it is their profitability that suffers.
ATM said:
I did some quick maths.
30k salary gives £2,093.30 take home pay per month.
I used the Nationwide mortgage calculator - screenshot attached. Borrowing £180k and paying £900 per month over 35 years obviously. So almost 50% of their income. That leaves our imaginary person around £1193 per month to live on and pay for everything else. The good news is its a fixed rate product.
30k salary gives £2,093.30 take home pay per month.
I used the Nationwide mortgage calculator - screenshot attached. Borrowing £180k and paying £900 per month over 35 years obviously. So almost 50% of their income. That leaves our imaginary person around £1193 per month to live on and pay for everything else. The good news is its a fixed rate product.
Where would they buy a house?
How much would it cost?
A mortgage of £180k, but what about the deposit, perhaps a £120k deposit.
How long would it take any average salary person to save £120k?
I feel very sorry for the younger generation at present.
Financially, many are scuppered.
Mr Whippy said:
Perhaps a big mega bust is coming, ala 1929? ...
Who knows?
I do wonder whether the huge and increasing government debt, is eventually going to be the cause of big trouble.
If citizens continually kept borrowing more and more, just to pay the minimum monthly credit card bill, we know how that ends.
The UK government is not alone having increasing debt, but in 2025-26 the grandly named Office for Budget Responsibilities said;
"We expect debt interest spending to total £111.2 billion. That would represent 8.3 per cent of total public spending.
Tax payers are obviously having to keep paying for this increasing amount of annual interest. Think what better ways this money could be used.
My earlier post was at the foot of the page, so quickly disappeared.
Hope that you don't mind me reposting.
Does anyone want to comment about the government debt situation ?
Mr Whippy said:
Perhaps a big mega bust is coming, ala 1929? ...
Who knows?
I do wonder whether the huge and increasing government debt, is eventually going to be the cause of big trouble for all of us.
If private citizens continually keet borrowing more and more, just to pay the minimum monthly credit card bill, we know how that ends.
The UK government is not alone having increasing debt, but in 2025-26 the grandly named Office for Budget Responsibilities said;
"We expect debt interest spending to total £111.2 billion. That would represent 8.3 per cent of total public spending.
Tax payers are obviously having to keep paying for this increasing amount of annual interest. Think what better ways this money could be used.
-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-.-
Mr Whippy said:
I don't get how government can just say they're all about growth and the economy, and that it's early days and it'll take time, blah blah.
It's very clearly not working, won't work, and is utterly destroying small businesses, and causing rampant shrinkflation and ens
tification among later businesses products and services.
It's very clearly not working, won't work, and is utterly destroying small businesses, and causing rampant shrinkflation and ens
tification among later businesses products and services.I agree.
Most people must know that higher taxes and greater costs placed on businesses, are never going to be an incentive for them to invest more in their enterprises to create growth. More likely for them to reduce risk, scrap expension plans and think about cuttng their costs (redundancies).
We then consider the conclusion, that the repeated statements about economic growth, might be a smokescreen for a grand plan.
The Prime Minister and the Chancellor of the Exchequer, both state they are members of the Fabian Society.
Take a look at the long-term aims of the Fabian Society. Could that be a clue about what is happening?
Panamax said:
What do you see as the problems with Fabian Society?
Aspiration, drive and ambition all appear to be disapproved of.
Private activity, property rights and entrepreneurship should be discouraged.
Nationalisation of economic activity and high taxes.
Rationing and control of individual choices.
Equality of wealth.
Not me saying that. It is on the internet ( so must be true.
)I saw all that on a visit to Leningrad in the USSR days.
The people did not look happy.
Almost no traffic, but there were reserved lanes in the centre of the roads for use by government officials.
Think they might have missed the chapter about equality of wealth.
asfault said:
The real scary thing is fuel costs are low,
Oil is below $70 a barrel and the £ is currently strong vs the dollar.
Either of these start going the wrong way, watch our fuel costs go up and inflation really ramp up.
Oil is below $70 a barrel and the £ is currently strong vs the dollar.
Either of these start going the wrong way, watch our fuel costs go up and inflation really ramp up.
Historically, $70 is not a low price for crude oil.
Fuel prices can be hedged fairly well.
Hold a couple of the oil majors, which have a continuous record of dividend payments.
When crude oil prices fall, our full costs will reduce.
If crude oil prices go high, we will pay more for our fuel, but at the same time having the satisfaction of the share prices increasing.
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