J.JsOH

They do not affect each other but combined they do affect the reported inflation rate.

Inflation is calculated on a range of items over a period, and takes into account the costs of many things, including furniture, clothing, petrol and diesel, and train tickets.
Statisticians add all these current prices together and compare the current total to the total from last period. The difference as a percent is the rise or fall in inflation.
So if sofas decreased in price but train travel went up then the inflation % would be pulled up or down by that change in price.

My point is the reported inflation rate is misleading and affects each person differently according to individual expenses.
An increase in essential train tickets will affect many on day to day basis and cost much more out of pocket than the price drop on a sofa which need only be bought once in a blue moon or never.

A lower inflation value this month means things didn't go up on average as much as they did last month, but remember, last months price increases are still there, they haven't gone away just because the increases were less this month.

Costs up 'only' 2.5% is still up on top of last months % whatever it was. Income isn't up for many.

Pom_Chch

Gotcha! I probably wont feel the gain of this 2.5% fall seeing as I wont be getting a payrise anytime soon and will have to fork out more money for train tickets in January.

dunroving

Yep, our union just published figures showing our salary has decreased by just under 12% in real terms ("purchasing power", if you will) over the past 3 years, I think it was (next to nothing in pay rises, while COL has risen). In the meantime, benefits have risen in line with inflation.

Pit Bull.

I know there's not been much of a pay rise for many because of the government cuts but a few months back inflation was running above 5% so the drop to 2.5% is at least half of what it was, which is better than nothing, true it means most are losing year on year due to the gap in inflation and wages rises, the UKs working population are doing it tough at moment that's for sure.

Bud the Wiser

Off topic. One of my major rants. "If they don't make the differential between what people receive for working much larger than what they can receive on benefits then you will never achieve prosperity."

On topic: Purchasing power in real terms is more significant to the individual than inflation figures. And how many times have inflation figures been massaged over the years?

Pom_Chch

That famous quote about lying:

"There's lies, damned lies and statistics."

Zen10

UK government borrowing rises to record August high -

Blow for George Osborne as latest figures mean deficit has widened 22% so far this year – compared with target of 4.6% reduction

http://www.guardian.co.uk/business/2...rd-august-high

Pit Bull.

Cheers for that, I am struggling to find out the real truth behind all the figures TBH I heard him say that the trillion pound deficit had been reduced by 25% the other day, which is £250 Billion pounds, but then I read he had borrowed more than the last Labour government, I can't follow what's going on, do you think the cuts are working?

dunroving

I don't know what the correct statistics are, but until the deficit is eradicated completely, and a surplus is maintained, the debt will continue to grow. That is the scariest part.

Pit Bull.

That's what I'm saying, is it coming down, I'm sure I heard Osbourne say it had been reduced by 25% already.

dunroving

No, I'm sure he's not talking about the debt ... surely? No, not possible.

I think most of the population doesn't realise the difference, which helps politicians when they say "We have reduced the deficit" - people think this is great, but all it means is that we are sinking into increasingly horrific debt at a slightly slower rate than we were. The size of the debt isn't going down, it's going up, but at a slower rate ... anyone feel free to correct me.

Pit Bull.

I have fallen for that centuries old trick of believing what a politician is saying, I feel a bit daft now, alright a lot daft, he said brazenly it had come down by 25% but then I heard borrowing had gone up, should have known.

cheeky_monkey

its not falling inflation is rising at 2.5%..so general items are 2.5% higher than they were..if you have no salary increase then you are worse off by 2.5% in general terms

Pit Bull.

I know your right, it's still better than 5% last year though.

dunroving

Actually, you're worse off by 2.44%, but close enough (your salary will only buy 97.56% of what it did if things cost 102.5% of their previous price).

Either way, we're all slowly going to hell in a handbasket (but it could be worse - we still enjoy a pretty decent standard of living compared to many countries).