New Inflation Rates - June 2017

ad Office Circular No. NP/112/17

To the Secretary, all Branches and Regional Councils
Tuesday 18 July 2017

Dear Colleagues

INFLATION HIGH NOW, BUT LIKELY TO TREND LOWER IN 2018 – SO CONSIDER

PRESSING FOR LONG PAY DEAL, BASED ON INFLATION RATE IN OCT/NOV/DEC 2017

The Retail Prices Index (RPI) was 3.5% for the year to July 2017, down from 3.7% for the year to June 2017.

RPI – which is the only measure we use when negotiating pay deals - is set to peak at the end of 2017 (see penultimate three-barred columns in chart below) and fall back in 2018 (see final three-barred columns in chart below):

 inflation june17

Other measures of inflation, such as CPI and CPIH – neither of which are appropriate for use in pay claims - are also published each month (by the Office for National Statistics). Both generally understate changes in the cost of living as experienced by average workers. (CPI was just 2.6% for the year to June 2017 and CPIH was just 2.6% for the year to June 2017).

However, although CPI and CPIH are lower than RPI, the three rates do generally track each other – meaning a rise or fall in one rate is likely to be mirrored in the others. As the government is trying to promote the use of the less generous CPI and CPIH rates, more extensive data on those rates is being made available by government agencies. That data – though specific to CPI and CPIH - can also be helpful in spotting likely trends in RPI.

For example, data produced in May by the Bank of England on CPI, confirms the more limited data available on RPI above. Specifically, inflation is set to peak in the final three months of 2017 – see second pair of columns in chart below:

 inflation june17_2

Yours sincerely,

 

Mick Cash
General Secretary