Inflation falling, prices rising??

[markemark]

Can someone please help me out. I keep reading the same line:
When the rate of inflation falls, it does not mean prices are coming down - it means they are rising less quickly.

Now my maths tells me this may not be true so am I wrong? Inflation is measuring prices against the same month last year. I know that today prices are 6.8% higher than last year, but surely that doesn't necessarily mean prices are still rising (although they could' be)? Prices can be falling and less than last month, but still higher than last year giving us the published inflation figures. To know whether prices are rising or falling we need to compare the change of rates of inflation for now and last year, or simply look at the prices of this month compared to last month.

Eg:
Pint of milk: Jul '22 £1, Aug '22 £1.05, Jul '23 £1.10, Aug '23 £1.08
July inflation is 10%, August inflation is 2.9%. Price of milk is falling

What am I missing here?

 

[Sea of vapours]

The reason that you've created an apparent contradiction there is that you need to put a timescale on the measure of inflation. i.e. if your milk has gone up 10% over a year then that's an annual inflation rate of 10%. Milk can still have fallen, for example, 2% in the previous month though, which is a monthly inflation rate of minus 2%. Both those rates are simultaneously correct; it's just that the timescale for an inflation rate is entirely critical. Generally speaking 'the' inflation rate is taken as annual.

 

[fossyant]

Mr Sheen is no longer 99p, it's more like £1.99 - I will be bankrupt !

 

[markemark]

The reason that you've created an apparent contradiction there is that you need to put a timescale on the measure of inflation. i.e. if your milk has gone up 10% over a year then that's an annual inflation rate of 10%. Milk can still have fallen, for example, 2% in the previous month though, which is a monthly inflation rate of minus 2%. Both those rates are simultaneously correct; it's just that the timescale for an inflation rate is entirely critical. Generally speaking 'the' inflation rate is taken as annual.

I know. But the yearly inflation is the metric used by the ONS and the government. However, it is often stated that prices are still rising, but they're often not.

 

[Sea of vapours]

I know. But that is the inflation metric used. However, it is often stated that prices are still rising, but they're often not.

Well yes, they *are* still rising on the 'inflation metric used', that being annual, since they very much are higher than a year ago. Literally any statement of that sort requires the timescale to be defined. It's sloppy of people to say 'prices are still rising' without clarifying that statement with 'over the last year' since it allows the supposed confusion you're talking about.

 

[markemark]

Ah, ok, so they're falling....but rising over a year. So I am not mad and prices are falling, but both they and I are somewhat guilty of not defining over what period.

However I would suggest it is still accurate to say they are falling compared to the last time they were measured which was last month.

 

[Tenkaykev]

" Who is doing the counting, what are they counting, how are they counting." One of my favourite Podcasts is " More or Less "

 

[OldShep]

Am I right in thinking the number has fallen in the month taken to calculate triple lock pensions?
Don’t be surprised if it rises again next month

 

[cyberknight]

and there are a number of factors that contribute to inflation so a few random prices doesnt give a full picture

 

[Tenkaykev]

Am I right in thinking the number has fallen in the month taken to calculate triple lock pensions?
Don’t be surprised if it rises again next month

You old cynic you...

 

[Jody]

Even if overall food prices are falling the fuel price is going up, house prices are remaining almost stable.

Food is only a part in the CPI to calculate inflation

 

[Andy in Germany]

I remember someone pointing out that although the increase in inflation may stop, that still means things cost more. For example if inflation is at 6% in Jan, than 8% in Feb, 10% in March, but in April is only 11%, then the rate of inflation has dropped but things are still going to be getting more expensive fairly quickly, so you won't notice any real improvement.

 

[markemark]

I remember someone pointing out that although the increase in inflation may stop, that still means things cost more. For example if inflation is at 6% in Jan, than 8% in Feb, 10% in March, but in April is only 11%, then the rate of inflation has dropped but things are still going to be getting more expensive fairly quickly, so you won't notice any real improvement.

Yeah but as shown up thread, costing more than a year ago but possibly costing less than a month ago.

 

[presta]

Can someone please help me out. I keep reading the same line:
When the rate of inflation falls, it does not mean prices are coming down - it means they are rising less quickly.

Now my maths tells me this may not be true so am I wrong? Inflation is measuring prices against the same month last year. I know that today prices are 6.8% higher than last year, but surely that doesn't necessarily mean prices are still rising (although they could' be)? Prices can be falling and less than last month, but still higher than last year giving us the published inflation figures. To know whether prices are rising or falling we need to compare the change of rates of inflation for now and last year, or simply look at the prices of this month compared to last month.

Eg:
Pint of milk: Jul '22 £1, Aug '22 £1.05, Jul '23 £1.10, Aug '23 £1.08
July inflation is 10%, August inflation is 2.9%. Price of milk is falling

What am I missing here?

Your example's right, but it's for just one item. Inflation's calculated using a basket of 559 goods and services, so the probability of enough of them doing that to affect the overall inflation index is minimal.

 

[markemark]

Your example's right, but it's for just one item. Inflation's calculated using a basket of 559 goods and services, so the probability of enough of them doing that to affect the overall inflation index is minimal.

I know that. But that’s irrelevant as it can be extrapolated for all items. Replace the milk with all items and multiply the amounts by 1,000 and the logic is the same. The price of everything can be more than last year but less than last month.