Tuesday, October 18, 2011

Inflation - time to do some sums

I wish people would pay a bit more attention to the figures.

As of 18th October 2011 inflation is 5.2%. This means that something that cost you £100 in October 2010 (a year ago) now costs £105.20.

The Bank of England tells us inflation will be only 3% next year as if that means prices will be coming down. They're not - it just means they will have gone up slightly less than this year.

So in October next year the thing that cost you £100 in 2010, £105.20 in 2011 will now cost £108.35. Unless inflation is less than Zero prices have gone up compared to the same period the previous year.

Or put another way if you were earning £25,000 in 2010 you'll need 27,000 in 2012 just to stand still. If you don't get a rise how do you think you will cope with a loss of a months wages?

Even 2% inflation means you are loosing a weeks wages every year.

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