Inflation Falls December 2013

Inflation Falls December 2013.

The Office for National Statistics has released inflation figures today for December 2013.

The headline rate for inflation, the Consumer Prices Index (CPI) which excludes housing costs fell to 2% from 2.1% in November.

Interestingly, the old measure for inflation, Retail Prices Index (RPI) including housing costs, rose from 2.6% to 2.7% pa.

Comment

Basic spending by the UK consumer in the run up to Christmas fell, along with fuel costs, which have contributed to the CPI fall as prices fall on demand.

We still look at RPI as the real benchmark for inflation.  Government will claim success as CPI is now at the Government target, but never forget they have changed the benchmark from RPI to CPI.

RPI includes housing costs, which are driven by wages.  Any government in debt, whether it is Labour, Conservative, the coalition or foreign governments needs inflation to devalue public sector/sovereign debt.  We expect RPI to remain steady and then increase in the coming years.  CPI may remain steady and increase in small, stable steps but RPI will rise.  Never forget the late 70’s and late 80’s when inflation soared as governments sought to devalue public debt.