Punctured equilibrium

If you’re going to know about one economic statistic, more than likely the one you’ll hear about is inflation.

The Office of National Statistics released this month’s inflation data this morning: over three thousand time series of how much things cost now (and how much they cost back in the past, when all of this was fields…)

Over at the Guardian we’ve been plotting the history of the retail price index, and its little sister the Consumer Price Index, back to 1949.

The big story today, though, is that we’ve hit a record RPI low: -1.2%. Why? And why is CPI still above zero?

We can find out by drilling down into the data. The big difference between RPI and CPI, in a nutshell, is that the CPI excludes the cost of housing — which means it excludes mortgages, and is much, much less sensitive to low interest rates.

So if you compare the change in the cost of household goods with the change in the cost of housing:

In fact, subtract one from the other —

you can see that it’s the fall in the housing market which is driving RPI down. (Check for yourself: RPI data broken down by sector.)

Another interesting set of facts you can glean from this dataset is how the price of food has changed over time:

So if you want to price how much a cheese sandwich was in 1984, all the data’s here for you to do it. If you use 50g of bread, 10g of butter, and 50g of cheese in your sandwich (we like cheese):

then the raw ingredients of a cheese sandwich now cost about 55p. Why cheddar’s got so much more expensive recently, we’re not sure, but we’re distraught here at Inkling Software; we’ll have to have something else for lunch!

About Andrew Walkingshaw

Andrew is a cofounder of Timetric.
This entry was posted in Economics, UK. Bookmark the permalink.

4 Responses to Punctured equilibrium

  1. Andrew Mobbs says:

    Why cheddar’s got so much more expensive recently, we’re not sure

    Partly because the price of milk has gone up:

    But also, the value add of cheese over milk seems to have been increasing since 1990:

    From the limited data available, this seems be fairly well correlated with an increase in agricultural earnings:

    So, it appears that the increased price of your cheese sandwich could be down to higher wages for agricultural workers. Blessed are the cheesemakers.

  2. Andrew Mobbs says:

    …OK, the embedded graphs didn’t work, full comment is here:
    http://mobbsy.livejournal.com/285293.html

  3. michael says:

    agricultural workers wages have declinend over this period ,
    and the price a farmer gets for his gallon of milk today is less than it was 25 years ago, if not, the same as it was 25 years ago. happy milking

  4. Pingback: UK inflation since 1948 « International Globe

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