{"id":3065,"date":"2010-09-16T11:02:51","date_gmt":"2010-09-16T11:02:51","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=3065"},"modified":"2025-03-27T15:49:06","modified_gmt":"2025-03-27T15:49:06","slug":"more-on-uk-cpi-clothing-distortion","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=3065","title":{"rendered":"More on UK CPI clothing distortion"},"content":{"rendered":"<p>According to the CPI, clothing and footwear prices fell by 1.7% in the year to August. The alternative RPI clothing and footwear index, by contrast, rose by 6.3%. The difference is large enough to affect an assessment of economy-wide inflation &ndash; the headline 12-month CPI rise would have been 3.5-3.6% rather than 3.1% in August if the clothing and footwear component had matched the increase in the RPI measure.<\/p>\n<p>The technical explanation for the difference is that the CPI uses geometric averaging to combine price movements of individual items, while the RPI uses arithmetic averaging. A non-technical explanation is that the CPI assumes that consumers are expert at shopping around for best value &ndash; so expert that they can obtain the same volume of clothing and footwear as a year ago while reducing their spending by 1.7%, despite a 6.3% rise in label prices.<\/p>\n<p>This stretches credulity. If the same volume could be bought for 1.7% less, it would be reasonable to expect total cash spending on clothing and footwear to be little changed from a year ago. Retail sales figures, however, show a 6.4% rise in turnover in textile, clothing and footwear stores in the year to August. Based on the 1.7% CPI fall, this suggests an increase of 8.2% in the volume of purchases &ndash; implausible when overall consumer spending has been growing weakly.<\/p>\n<p>While difficult to prove, the 6.4% rise in cash spending is likely to have been driven by&nbsp;higher unit costs rather than a surge in consumer demand for clothing and footwear. The 6.3%&nbsp;increase in the RPI clothing and footwear index, in other words, is probably a better reflection of consumers&#8217; experience than the 1.7% decline in the CPI measure, in turn implying that the headline CPI understates true cost of living inflation.&nbsp;&nbsp;<\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" style=\"width: 680px;\" src=\"\/storage\/chart1_16-09-2010.gif?__SQUARESPACE_CACHEVERSION=1284636749333\" alt=\"\" \/><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>According to the CPI, clothing and footwear prices fell by 1.7% in the year to August. The alternative RPI clothing and footwear index, by contrast, rose by 6.3%. The difference is large enough to affect an assessment of economy-wide inflation &ndash; the headline 12-month CPI rise would have been 3.5-3.6% rather than 3.1% in August [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-3065","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3065","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3065"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3065\/revisions"}],"predecessor-version":[{"id":5374,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3065\/revisions\/5374"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3065"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3065"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3065"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}