In May our UK Consumer Prices Index was running at 4.5 % on an annual basis, and on the same basis the Retail Prices Index was running at 5.2 %. That is clearly ahead of the rates in the other founding members of the G7, which we are most likely to be compared to.
Here are some of their most recent figures.
In the USA , the CPI-U, representing the broad urban population, was 3.6% in May. They also give a CPI-W figure for ‘urban wage earners and clerical workers’ which was 4.1 %, but they don’t just give a national figure for each of these populations. They also give a CPI-U figure and a CPI-W figure for most of their big cities and the US census regions.
This has made the USA very sensitive to emerging inflation and has prompted the USA to be one of the world’s lowest inflation economies. US inflation has been clearly negative and well within any 2 % target for most of the last few years while UK inflation has been consistently above target and poorly predicted by the Bank of England.
Having a range of monthly numbers means a worker in Chicago and the Mid-West knows whether his prices are rising in line with the official figures for his area, in a way that someone working in Birmingham England cannot – because we only get a couple of different national disembodied averages for our official figures. So if the US figures are out of proportion with what workers are finding in the American cities the figures can be challenged in a way they cannot in the UK.
A slightly more detailed outline of how the US inflation indices (and the other overseas systems outlined below) have both evolved and worked can be found in our report of September 2010 here.
France also has an index that is intended to represent the total population as well as one that represents what is called an urban household headed by a worker. This latter is particularly used for adjusting the minimum wage. For France inflation was 2.0% for the main population in May and 2.0% for the worker’s household. Until the 1960s France used to only calculate an inflation rate for Paris and say that that was the French inflation rate.
The Italian indices for registering inflation are today pretty much identical to the French system. In May the inflation rate for the broadest population was 2.6 %, and also 2.6 % for workers’ families. Unfortunately the Italians no longer translate their full monthly release. It can be deciphered with only a basic French/Italian at the link here. The big cities all each have a separate published figure.
German inflation for May was 2.3%. Germany now only does one figure for the broad population of Germany, but most of the large federal states have produced a figure for their own local population since the 1960s.
The State of Hesse, which is home to Birmingham’s twin city of Frankfurt, had an inflation rate which was lower at 2.0% . We also have a twin city in the former East Germany which is Leipzig in the state of Saxony. The Saxon inflation rate was slightly higher at 2.3% the same as the national figure.
From what has been shown here of how other G7 countries register inflation, you will be able to appreciate the basis of what we are proposing should become our future UK framework of inflation indices.
Main concerns of some of our most recent reports
Our last report outlined how the value of Sterling has been allowed to fall by our UK authorities. The Euro, which is supposed to be in crisis, has fallen this year but is actually far stronger than when it was launched and when the global crash occurred, when weighted against the currencies it trades with. This can be seen in the figures available on the Bank of England website. Hence inflation is better controlled on the continent.
Our January report explained how the world wide inflation is the consequence of how globalisation works and how this was not understood by policy makers and the authorities. Our report for February, outlined how the global price spiral had to become the focus of our domestic economic policy for the forseeable future.
We also recently reported on how the official Bank of England policy interest rate has very little bearing on what borrowers in the UK are charged by the Banks. UK consumers are charged far more than in most of the Euro economies that are supposed to be in crisis, and our savers get less too. We suggest that the whole way the bank gives guidance on rates needs to be re-thought.
Further details of our project can be found at Regional Prosperity & Inflation Project