UKH

... is explicitly designed to exclude food and energy.

So... WHY? What's that good for?

Is this some kind of new philosophy in which people (eaters of food) and energy are not inputs into the economy?

It just seems so regressive and denialist and contrived to exclude what, coincidentally, happens to be the very highest marginal inflation rates from your metric for inflation.

Any economists in the room who can actually argue why this concept of "core inflation" suddenly seems so popular – besides the obvious convenience and denial?

I had the misfortune of being on a 'global leadership' call yesterday with corporate c**** I work for.

The issue of compensation was on the agenda. They started of by trying to re-frame the issue; what does compensation really mean? Lots of eye rolling. 

We were told to remind our teams that full compensation needs to include consideration for training, career advancement and 'the inspiring and creative workspaces we have invested in'.

Good luck taking that lot to Tesco and trying to buy a pint of milk.

The punchline is that after the ONS told us on Wednesday that inflation is running at 10.4% they have offered +4%.

C0cks

My guess is that they are seen as things whose price fluctuates up and down a lot, so including them masks the more general inflationary trend. If so, then this core inflation seems a sensible and useful measure.

I've been there. Too many times. Makes my blood boil!

Particularly if, like it has ALWAYS proved to be in all the jobs I've ever had, the "training" is non-existent because all requests are denied (too expensive! not project-relevant!) and the time would have to come from non-work hours (which nobody has to spare, after over-time and crunch is given to the company, anyway) and the "career advancement" is a myth because there's nowhere to go and the "workspaces" are just the next iteration of bright-primary-colours and the next year's model of open-plan "playschool for offices" that nobody's asked for or ever wanted.

Is there any wonder that people find the dire cake on cake-day to be irresistable? Perhaps they're hoping the sugar will given them a heart-attack and put them out of their misery.

The internet, it’s amazing and has all sorts of information about why stuff is happening. You can use it to answer questions!

From the ONS website:

“Core inflation is used to assess the underlying inflationary pressures in the economy, which aims to reflect the durable part of consumer price inflation. This is the part that is expected to persist into the medium or longer term. It acknowledges that in the short run, headline inflation rates may be driven by temporary supply shocks, or other effects that do not have a lasting impact, and as such, there may be less imperative for policymakers to respond…

“Core inflation measures can also be contentious. By excluding or down weighting items that are typically volatile but matter to the public, such as energy and food prices, they may be criticised as 'unrepresentative'…

”So, although core inflation measures may provide a useful perspective on inflation developments, consideration should be given to how they have been created, and care exercised when interpreting what they tell. We consider core inflation measures as complementary to the headline measures of consumer price inflation.”

Basically, it’s an extra indicator to help prevent policy makers over tightening monetary policy, ie raising interest rates when they don’t have to. The whole point of tight monetary policy is to “dampen activity” which is a polite way of saying some people are going to lose their jobs, so anything that prevents this going too far is essentially quite useful. 

Does it?

Even if some kind of smoothing to reveal a more macro trend was warranted – and there are other ways of achieving that, from a noisy signal, including simply sampling the signal "year-on-year" which is already done, in the case of inflation – surely the very purpose of a metric to measure inflation is to represent the experience of a participant in the economy and individuals, participating in the economy, will very definitely be experiencing the fact that they can't afford as much energy or as much food as they could, a few years ago?

In quite a number of cases: they can't afford the energy and food that they NEED!

What is the usefulness and sense in obscuring this fact – even if the signal that reveals it is "fluctuating"?

See seankennys reply. My guess was right (I've just googled it too). 

Not this metric, at least not in the short term. Other metrics are available.

I can see the sense in this.

I’m sure the government would argue, quite reasonably that they have provided targeted support around the volatile energy market, so at least in public sector pay, they should not include inflationary energy costs in pay discussions.

As a public sector worker, I’d happily accept 6% which is approximately the current core inflation rate. Of course, what I am being offered is 3.88% and it was less than that last year.

Core huh, yeah
What is it good for?
Absolutely nothing, uhh
Core huh, yeah
What is it good for?
Absolutely nothing
Say it again, y'all
Core, huh (good God)
What is it good for?
Absolutely nothing, listen to me, oh

Core inflation is caused by cheap junk food, too much alcohol and is experienced most acutely by the middle aged.

I came here to make that joke but I see you have beaten me to it!

A related question is: why is food inflation as high as it right now? Looking at the reported profit margins of large companies, it does seem like price gouging could be going on, with the effects of Covid and Ukraine being used as a cover.

See e.g. https://www.theguardian.com/business/2023/mar/12/global-greedflation-big-fi... and https://www.theguardian.com/business/2023/mar/24/greedflation-are-large-fir...

That's a new one - Greedflation : a few excerpts from the 1st link; sounds like conspiracy to me !

Higher profits margins are the result of “tacit collusion” by large companies, adding to the prices of hundreds of goods and services that were already under pressure after the Covid-19 pandemic and Russia’s invasion of Ukraine, the report said.

“Profiteering is a reflection of Britain’s broken economy. From price gouging to state-licensed monopolies in energy and utilities, the choices made by corporations are revealed to have caused historic ‘price spiralling’ – and governments are letting them do it,” it said.

Sharon Graham, Unite’s general secretary, said households were suffering from a systemic problem. “Our research exposes where and how the economy is being rigged against workers – from supermarkets to energy bills, oil refineries to transport, we’re all paying the price,” she said.

Graham said: “The profiteering crisis isn’t just a few bad apples – it’s systemic across our broken economy. Entire industries are choosing to take advantage of a crisis, resulting in the spiralling prices of goods we all need.”

As a part of the process, what did you do about it? 

Can you repeat that in English? 

Profit. Profit. Profit. Profit. Profit. Profit. Profit. Profit. Profit. Profit. Profit. Profit.