Inflation falls by 10 percent or 0.3 percentage points
Latest inflation figures from the Office of National Statistics show a fall from 3% to 2.7% in the annual inflation rate as measured by the Consumer Price index.
Or to put that another way, prices rose by 3% between January 2017 and January 2018 but by only 2.7% between February 2017 and February 2018. E.g. a reduction of 0.3 percentage points, or 10% of the previous inflation rate.
Apologies to those readers with a statistical or economics background for somewhat labouring the point but this happens to be a particularly clear set of numbers to use to explain the difference between percentages and percentage points (particularly when you are talking about a change in a figure which itself is expressed as a percentage.)
Describe inflation as having dropped by 10% (of the previous inflation rate) and it sounds like an enormous drop. Describe the change in percentage point terms - as 0.3 of one percent (of the previous price level) and it sounds tiny.
This is why many journalists and commentators ought to be more careful to explain when they are talking about percentages and when they are talking about percentage points. If those listening do not correctly understand which you mean it can cause them to massively misunderstand the size of the effect you are describing.
The truth is that both these figures are relevant depending on what aspect of the figures you are interested in. The difference in impact on your personal purchasing power is the smaller 0.3 of a percentage point figure.
But for the inflation rate to be declining at 10% per month is quite significant in terms of how quickly that sort of change rate can affect, say, the difference between price growth and wage growth which affects whether you are getting richer or getting poorer.
This is good news for the UK economy because it suggests that the inflation blip caused by the fall in the pound after the Brexit vote may be working its way out of the system, and that in turn may indicate that for millions of people, real wages are likely to start rising again.
Key drivers for the reduction in the inflation rate were a drop in fuel prices and a lower increase in food prices compared with the previous year. Petrol prices fell by 0.2p per litre on the month, while diesel dropped by 0.1p. Food prices rose by 0.1% between January and February, compared with a 0.8% rise between January and February 2017, which has now dropped out of the calculations.
Phil Gooding, from the Office for National Statistics, said: "Many of the early 2017 price increases due to the previous depreciation of the pound have started to work through the system."
Mel Stride, financial secretary to the Treasury, added:
"We know families feel the cost of living at the end of every working week.
"We are increasing the National Living Wage which is already helping the lowest earners see their pay rise by almost 7% above inflation."
Or to put that another way, prices rose by 3% between January 2017 and January 2018 but by only 2.7% between February 2017 and February 2018. E.g. a reduction of 0.3 percentage points, or 10% of the previous inflation rate.
Apologies to those readers with a statistical or economics background for somewhat labouring the point but this happens to be a particularly clear set of numbers to use to explain the difference between percentages and percentage points (particularly when you are talking about a change in a figure which itself is expressed as a percentage.)
Describe inflation as having dropped by 10% (of the previous inflation rate) and it sounds like an enormous drop. Describe the change in percentage point terms - as 0.3 of one percent (of the previous price level) and it sounds tiny.
This is why many journalists and commentators ought to be more careful to explain when they are talking about percentages and when they are talking about percentage points. If those listening do not correctly understand which you mean it can cause them to massively misunderstand the size of the effect you are describing.
The truth is that both these figures are relevant depending on what aspect of the figures you are interested in. The difference in impact on your personal purchasing power is the smaller 0.3 of a percentage point figure.
But for the inflation rate to be declining at 10% per month is quite significant in terms of how quickly that sort of change rate can affect, say, the difference between price growth and wage growth which affects whether you are getting richer or getting poorer.
This is good news for the UK economy because it suggests that the inflation blip caused by the fall in the pound after the Brexit vote may be working its way out of the system, and that in turn may indicate that for millions of people, real wages are likely to start rising again.
Key drivers for the reduction in the inflation rate were a drop in fuel prices and a lower increase in food prices compared with the previous year. Petrol prices fell by 0.2p per litre on the month, while diesel dropped by 0.1p. Food prices rose by 0.1% between January and February, compared with a 0.8% rise between January and February 2017, which has now dropped out of the calculations.
Phil Gooding, from the Office for National Statistics, said: "Many of the early 2017 price increases due to the previous depreciation of the pound have started to work through the system."
Mel Stride, financial secretary to the Treasury, added:
"We know families feel the cost of living at the end of every working week.
"We are increasing the National Living Wage which is already helping the lowest earners see their pay rise by almost 7% above inflation."
Comments
in 2018 one pound wont even pay for your parking, but 1/2 ounce of gold, well that can do exactly what £1 could have in 1918.
Mind you, most of the damage was done in periods when inflation was a lot more than 3%.