Hey guys, it's Sasha UK Inflation has fallen to 3.9% and boy is everybody celebrating. Jeremy Hunt has just come out to say inflation has more than halfed from over 11% to 3.9% so we can see the plan is working. Watching politicians pretend that there is some kind of a plan, queue up to take credit for something that has absolutely nothing to do with them. Would be funny if it wasn't so appalling and dismal.

And the worst bit is that the overall inflation number is absolutely not showing the massive problem in the UK economy underneath. In fact, these inflation numbers are flat out wrong. Inflation in November has actually gone back up instead of falling like the official data is showing. I Want to show you the numbers that Rishy Sunak and Jeremy Hunt will not be sharing on Twitter and I Want to explain why popping the champagne on the UK economy is a little bit premature? Here is the overall Cpih inflation data.

This includes housing. so I tend to ignore ignore the CPI data that everyone all the newspapers talk about. I Never understood why inflation without the most expensive monthly payment that most people pay in know, rent or mortgage is somehow a better metric. But anyway, Cpih has fallen from 4.7 to 4.2% You can see that the month- on-month movement is minus 0.1% So the net effect that this table is trying to show you is that prices on average fell in November.

Not that inflation fell, not the rate at which prices are growing. No, the prices according to this data in the UK in November were fractionally cheaper than they were in October I Know for a fact that a lot of you most definitely can see this happening. Please tell me in the comments: how fast prices are falling where you live I will show you in a minute why this is all complete horseshit. Why inflation actually went up 0.4% in November instead of down 0.5% The data in this report is simply incorrect.

But first, while the UK government is celebrating, let's slowly dive deeper into some of the headline numbers: Food inflation is down at 99.2% so food is still going up 99.2% year on year. This is absolutely insane. and although it's coming down, the speed at which is coming down is way slower. way slower than everywhere else in the US Food Inflation is at 2.9% in Germany is at 5.8% in France It's pretty high at 7.6% but it's still way lower than in the UK In Italy it's 5.9% In Switzerland it's 3.2% I could go on.

but I Think you get the point. The fact that UK food inflation is so much higher than everywhere else, of course, has nothing at all to do with Brexit or the UK government's incompetence. It's just Market forces that are unique and specific to the UK that affect nowhere else. Inflation on Goods has fallen significantly, mostly because the UK doesn't actually manufacture all these Goods so that is coming from other countries.

but Services Inflation is still very sticky at 6.0% down marginally from 6.2% and services inflation is high because wages in the UK are growing fast at the moment. wage growth has eased a little bit in the most recent data, but it's still at 7.2% which is extremely high. And remember, in January the 2% National Insurance drop comes in which is an effective pay increase for most people. and then the minimum wage goes up by 99.8% in April in just a few months, which of course is going to massively help with stopping wages grow GR in the fastest rates in recent history, which is what's now driving a lot of the inflation.

One number in this report is a little bit confusing. Inflation on owner occupier costs is down from 5.4 to 5.3% Now, this doesn't seem to make any logical sense because mortgage payments at the moment are going up a lot every single month and this is where those mortgage payments show up in the inflation data. I checked and there wasn't any kind of jump. 12 months ago, there wasn't some kind of cycling process here.

I Don't really see how this data came about I Just got my mortgage renewal letter like many of you have been telling me in the comments. and if I do nothing and roll onto the standard rate, my payment goes up 58%. If I take the cheapest new fix available, the payment goes up just 29% and we know from the data that this is happening to millions of households right across the country. but owner occupier cost inflation somehow dipped 0.1% in the last month.

At the same time, rent inflation has been flat according to this data at 6.4% in the underlying data. The key thing now, and this has been coming for some time, is that rent and owner occupier costs are now above the average rate of inflation, so those are now pulling the overall number up. This is significant and here you can see that the rent inflation has gone up from 4.5% to 6.4% in the last 12 months, and O is up from 3.7 to 5.3% If you look at table 11 in this data, you'll notice that the waiting of the these factors have actually been much lower in 2023 than they had been before. and this of course makes no real sense because interest rates started going up in 2022.

But the reason is that for the last 3 years, the UK did not use actual spend, they did not use actual data to set the weights in the inflation data. No, they said that because of covid, actual data is unreliable, so why not just make it up? However, because of the unprecedented of the last few years and the larger changes seen in spending patterns, we adjusted the data so that the resulting weights were more reflective of the Year immediately before use in Consumer Price Inflation: This is in line with the procedures adopted in 2021 and 2022. Since the final Corona virus lockdown occurred in 2021, we plan to revert to our standard methodology and use unadjusted data reflecting spending in 2022. When producing the 2024 Cpih and CPI weight, owner occupies housing has fallen by 14 points between updates and actual rents for housing fell by Five Points.

Underlying expenditure is relatively flat. However, the Fallen weight is caused by a reallocation of weight in the basket where more substantive changes have occurred. Basically, they just admit flat out that they made it up and they artificially reduced the weight of owner, occupier cost and rents. So, for the first time in a few years, they should begin to actually calculate how much people are spending on their mortgage payments and rents based on real data from January onwards instead of you know, just making it up as they go at the same time.

A few days ago, the Office of National Statistics admitted that they have been miscalculating rent prices. They're going to fix it, but the fix will only apply from March next year because if they applied it now, if they applied it immediately, inflation would go back up. So much better to keep reporting data that you know is wrong you already know is wrong. To please the Polet Bureau, the new methodology from the Office of National Statistics, which will be used in official inflation data from March next year, doubles the number of rental prices used to produce the figures to about 500,000 A year.

Had it been used in recent years, the new method would have driven a slightly quicker pace of overall inflation. Average annual growth and rental prices between January 2016 and October 20123 is estimated at 2.8% up from 2.1% under the exist method. So the slight difference as they refer to it miscalculated the growth in rent prices by 33% I Know an easy mistake to make now. Meanwhile, UK house prices have fallen at the fastest rate since the financial crash in new data that just came out this morning.

and the J The position of these different bits of data just does not make any sense. We know that interest rates are high. We know everyone's mortgage payments and rents are going up by a lot more than 5 or 6% And of course, higher interest rates mean that people can't afford hand houses. 3 years ago, if you took out a mortgage at 1.5% mine was lower over 25 years.

For ,000 a month, you could buy a house worth 250,000 Today, that same 1,000 payment a month on the mortgage at 5% interest can only buy you a house worth 170,000 So three years ago, for the same monthly mortgage payment, you could buy a house worth 50% more. So it is perhaps not very surprising that house prices are now falling, but inflation data is still not reflecting these realities. The problem for The UK government that is busy patting itself on the back is that every month more people are rolling off their low interest rate mortgages and onto much higher interest rate ones. And next year, the weights on the rent and owner occupier cost will be going up.

unless the Office of National Statistics quickly develops a new way to pretend that people's housing costs are not spiraling. Economists are tripping over each other in the media today, predicting rate cut coming next year, maybe early next year, while the UK GDP fell 0.3% last month and continu stagnating for the fourth year in a row. And on this chart, from today's report, you might see a little problem. See these blue lines down here.

This is electricity, gas, and other fuels, and that bit alone is contributing minus 0.89% to inflation data this month. So Cpih inflation fell from 4.7% to 4.2% but 0.9 % out of that 0.5% drop came from energy. So Energy prices fell for two reasons: Oil price has been falling so petrol prices are a bit cheaper at the pump, and the energy price cap has also come down. Now, most people's direct debit payments have not changed, but the Office of National Statistics does not care about what you actually pay.

Energy price cap is down, so the inflation data goes down. In fact, most people are actually paying more this year because last winter the UK government was paying 400 towards everyone's energy bills. But of course, that is not how inflation is measured. People are paying more for their energy than 12 months ago Today, people are paying more than they did in the same month last year.

The monthly payment net of the government subsidy is higher today than it was last year, but electricity is apparently according to this data, 15.4% cheaper than 12 months ago, and gas is 31% cheaper. Oh my. God Even the dog disagrees, which magically happens to be bringing inflation down. If Energy prices didn't change, inflation would have gone up in November from 4.7 to 5.1% But you see, the problem is that if you actually explain this to people, if you explain that the inflation read is factually incorrect because inflation only dropped this month because of energy and energy payments have not actually dropped, then the picture suddenly looks very different.

and as the new weights come in next year and more and more people have to remortgage on high interest rates. and as wages go up in April and in January those energy bills are going to go back up. Because of all of that, the situation is not getting any better. But hey, who cares about the actual data when you can just make the numbers up and pretend that everything is great, right?.