What’s the real rate of inflation?

It’s hard to find good articles, or research working out the real rate of price inflation.  You get the impression they don’t want you to know, and want you to believe the headline annual rates.  This article is from 2012 comparing prices in 1982, about all I could find.

What’s your rate of inflation?  Food prices alone have tripled over the last ten years, according to some sources.  Any thoughts?

How prices changed over 30 years

The price of a pint has jumped from 73p to £3.18 in a survey that highlights the falling value of money.

Beer prices

Your round: The price of beer has risen faster than other everyday goods Photo: Andrew Fox / Alamy

The falling value of money was underlined today by a study that showed a two thirds (67pc) fall over the last 30 years.

Purchasing power has been crushed by the spiralling cost of everyday costs.

The cost of a pint of beer has risen from 73p to £3.18 between 1982 and 2012, according to the research by Lloyds TSB Private Banking.

Alcohol prices have been pushed up far more than inflation due to steeply rising duty.

A three-fold increase in retail prices means that someone would need £299 today to have the equivalent purchasing power of £100 back in 1982, the year in which the Duke of Cambridge was born and Culture Club and Bucks Fizz had number one singles.

The research suggested that if inflation rises in line with government targets, someone will need to have £229 in their back pocket in 2042 to have the same spending power as £100 now.

Its analysis of official and commercial figures found that a loaf of bread has increased more than three-fold in the last three decades, from 37p in 1982 to £1.24 by 2012.

(There is also quality inflation where the same product gets smaller or contains less nutrients, and more chemicals or sugar etc.  Houses get smaller, have less land.)

Despite a sluggish market in recent years, average house prices have soared by six times over the period, from £45,211 to £273,700.

The price of a pint of milk has increased at a slower rate, doubling from 20p 30 years ago to 46p.

The purchasing power of cash has eroded at an average rate of 3.7pc a year over the past 30 years.

Nitesh Patel, an economist at Lloyds TSB Private Banking, said: “Someone today would need nearly £300 to have the same spending power of £100 in 1982, meaning someone breaking the million pound mark 30 years ago would have the equivalent of £3m today.

“Looking to the future, even if inflation is kept firmly under control and rises only in line with the Government’s target, it is likely that the value of money will continue to reduce significantly and decline by more than half its value by 2042.”

The results will be particularly for poignant for savers who have seen their nest eggs attacked by inflation in recent years. Returns on accounts, which should protect the value of savings, have been rock bottom for nearly four years.

Falling sterling, which has come under fresh pressure after a credit downgrade by Moody’s on Friday, has also been in long-term decline against many countries, which erodes the buying power of holidaymakers and those looking to move abroad.

3:47PM GMT 25 Feb 2013

Everyday goods Price in 1982 Price in 2012 % change
Draught lager, per pint 73p £3.18 336%
Bread, white loaf, sliced, 37p £1.24 235%
Apples, per kilo 68p £1.75 157%
Milk, pasteurised, per pint 20p 46p 130%
Sausages, per kg £1.59 £4.40 177%
Butter, per 250g 50p £1.38 176%
Carrots, per kg 35p 86p 146%
Sugar, per kg 44p 98p 123%
Coffee, instant, per 100g 97p £2.68 176%
Eggs, per dozen 73p £2.82 286%
Vehicle fuel, ultra low sulphur diesel, per litre 36p £1.42 294%

Compared to assets…

Asset Price in 1982 Price in 2012 % change
Detached house, UK average, £45,211 £273,700 505%
Gold, troy ounce £203 £1,096 439%

2 Responses to “What’s the real rate of inflation?”

  1. bigyam80 says:

    All so that we can pay the interest on the loans from the privately owned,jewish “Bank of England”

  2. Tapestry says:

    Gold was at a peak at that time. Since gone down. Houses kept on rising. That might suggest gold is at a better point than housing for future price rises. Better than gold would be silver which has halved since the 2011/2 peak. What does J.P. Morgan claim to have stockpiled? – 90 million ounces of silver.

    Gold is for governments and corporations to hold. Private individuals don’t have enough security to hold the yellow metal. The white one might be better for many, despite having to pay VAT to buy it.

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