Consumer price inflation is the speed at which the prices of goods and services bought by households rise or fall. Consumer price inflation is estimated by using price indices. One way to understand a price index is to think of a very large shopping basket containing all the goods and services bought by households. The price index estimates changes to the total cost of this basket. ONS consumer price indices are published monthly.
A price index can be used to measure inflation in a number of ways. The most common is to look at how the index has changed over a year. This is calculated by comparing the price index for the latest month with the same month a year ago. This is known as the 12-month inflation rate. This bulletin measures inflation to February 2014, so the 12-month rate measures changes in prices between February 2013 and February 2014.
ONS publishes a range of measures of consumer price and other price inflation. A tale of many price indices summarises information on the different measures.
The CPI is a measure of consumer price inflation produced to international standards and in line with European regulations. First published in 1997 as the Harmonised Index of Consumer Prices (HICP), the CPI is the inflation measure used in the Government’s target for inflation.
The CPI is also used for purposes such as uprating pensions, wages and benefits and can aid in the understanding of inflation on family budgets. For more information see 'Users and uses of consumer price inflation statistics'.
The CPI 12-month rate (the amount prices change over a year) between February 2013 and February 2014 stood at 1.7%. This means that a basket of goods and services that cost £100.00 in February 2013 would have cost £101.70 in February 2014. The latest CPI 12-month rate continues the recent trend which has seen inflation in the region of 2%.
Over the last five years, the three main contributors to the 12-month inflation rate have been food & non-alcoholic beverages, housing, water, electricity, gas & other fuels and transport (including motor fuels). Combined, these three sectors have, on average, accounted for over half of the 12-month inflation rate each month. While having a downward impact on the change in the CPI 12-month rate between January and February 2014, prices for housing, water, electricity, gas & other fuels accounted for around a quarter of inflation.
Figure A below shows the CPI 12-month rate over the last 10 years. Table A below shows the CPI 1-month (the amount prices change between two consecutive months) and 12-month rates and index values for the last year. A larger version of the chart can be viewed by clicking on it (HTML version only).
|Index1 (UK, 2005 = 100)||1-month rate||12-month rate|
This section explains which goods and services had the biggest impact on the change to the 12-month rate between January and February 2014 and, where relevant, considers the longer-term inflationary trends for these goods and services.
The change in the CPI 12-month rate can be calculated by comparing the 12-month rates for two consecutive months. An alternative, and equally valid approach, is to calculate it by comparing the price change between the latest two months and the price change between the same two months a year ago. Explaining the contribution to change in the 12-month rate is a diagram explaining the calculation.
The CPI rose by 0.5% between January and February 2014, compared with a larger rise of 0.7% between the same two months in 2013. The 1-month movement was therefore 0.2 percentage points lower this year compared with last year. This led to the CPI 12-month rate falling from 1.9% in January to 1.7% in February.
The largest downward contributions to the change in the CPI 12-month rate between January and February 2014 came from:
transport: prices, overall, rose by 0.3% between January and February 2014 compared with a rise of 1.2% between the same two months a year earlier. Within the transport sector, the main downward effect came from motor fuels. Petrol prices fell by 0.8 pence per litre between January and February this year compared with a rise of 4.0 pence per litre between the same two months a year ago. Similarly diesel prices fell by 0.8 pence per litre this year compared with a rise of 3.7 pence per litre a year ago. There was also a smaller downward contribution from air transport where fares rose between January and February but by less than a year ago. These effects were partially offset by a small upward contribution from second-hand cars.
housing & household services: prices, overall, rose by less than a year ago. The effect came almost entirely from gas and electricity where there was a combination of price rises and reductions resulting from changes to the Energy Companies Obligation scheme this year. This compared with price rises a year ago.
clothing & footwear: prices rose, as usual, between January and February but by less than in 2013. The downward effect came principally from garments, particularly men’s and women’s outerwear.
The largest upward contributions to the change in the CPI 12-month rate between January and February 2014 came from:
furniture, household equipment & maintenance: prices, overall, rose by 2.4% between January and February 2014 compared with a rise of 1.5% between the same two months a year earlier. Within this category, prices of furniture & furnishings rose as usual between January and February following the end of sales periods but the rise was larger this year than a year ago, particularly for lounge furniture.
recreation & culture: prices, overall, rose by more between January and February 2014 than between the same two months a year earlier. There were small upward contributions from data processing equipment and books.
Figure B below shows the contributions from each part of the CPI basket of goods and services. A larger version of the chart can be viewed by clicking on it (HTML version only).
CPIH is a measure of UK consumer price inflation that includes owner occupiers’ housing costs (OOH). These are the costs of housing services associated with owning, maintaining and living in one’s own home. OOH does not include costs such as utility bills, minor repairs and maintenance which are already included in the index. CPIH uses an approach called rental equivalence to measure OOH. Rental equivalence uses the rent paid for an equivalent house as a proxy for the costs faced by an owner occupier. In other words this answers the question “how much would I have to pay in rent to live in a home like mine?” for an owner occupier. OOH does not seek to capture increases in house prices. Although, this may be inconsistent with some users’ expectations of measures of OOH, the inclusion of an asset price and therefore capital gains makes the measure less suitable for a measure of consumption. OOH currently accounts for just over 15% of the expenditure weight of CPIH. This has increased notably from a weight of 10% in 2005.
Currently, the method of calculation, the population coverage and the basket of goods and services are the same as the Consumer Prices Index (CPI), with the exception of OOH. The method of deriving the weights for CPIH and the data used for these are also the same as for CPI, with the exception of OOH. This can result in some differences from the CPI.
In February 2014, the 12-month rate (the rate at which prices increased between February 2013 and February 2014) for CPIH stood at 1.6%, down from 1.8% in January.
The difference between the CPI and CPIH annual rates in February 2014 was 0.1 percentage points, unchanged from the difference in January. Owner occupiers’ housing costs were little changed between January and February 2014, compared with another negligible change between the same two months a year earlier. The 1-month movement was therefore the same in both years and this meant that OOH had no impact on the change in the overall CPIH 12-month rate between the two months.
Figure C below shows the CPIH and OOH component 12-month rates since January 2006 (the earliest date for which the CPIH 12-month rate can be calculated). The CPI 12-month rate has been included for comparative purposes. Table B below shows the CPIH and OOH component 1-month and 12-month rates and index values for the last year. A larger version of the chart can be viewed by clicking on it (HTML version only).
|CPIH Index (UK, 2005 = 100)||OOH Index (UK, 2005 = 100)||CPIH 1-month rate||OOH 1-month rate||CPIH 12-month rate||OOH 12-month rate|
In accordance with the Statistics and Registration Service Act 2007, the Retail Prices Index and its derivatives have been assessed against the Code of Practice for Official Statistics and found not to meet the required standard for designation as National Statistics. The full assessment report can be found on the UK Statistics Authority website.
The RPI is a long-standing measure of UK inflation that has historically been used for a wide range of purposes such as the indexation of pensions, rents and index-linked gilts. For further information see 'Users and uses of consumer price inflation statistics'.
RPIJ is an improved variant of the Retail Prices Index, which is calculated using formulae that meet international standards. The rationale for creating RPIJ was to give users a better alternative to the RPI if their needs were for a measure of inflation based on the same population, classifications, weights etc as the RPI. Currently, RPIJ also acts as an analytical series, in that it allows users to see the impact of using the Jevons (which meets international standards) in place of the Carli formula (which does not meet international standards) in the RPI. The use of the different formulae at the elementary aggregate level is currently the only difference between the two indices. ONS does not produce detailed goods and services indices for RPIJ.
In February 2014, the 12-month rate for RPIJ stood at 2.0%, down from 2.1% in January and notably lower than the rate seen through the first three quarters of 2013. CPIH and RPIJ moved in the same direction this month and broadly continue to track each other as they have done for the last two years.
The RPI 12-month rate for February 2014 stood at 2.7%, meaning that it was 0.7 percentage points higher than it would have been had it used formulae that meet international standards.
Figure D below shows the RPI and RPIJ 12-month rates for the last 10 years. Over this period the RPIJ 12-month rate has been, on average, 0.5 percentage points lower than the RPI. Cumulatively, inflation as measured by the RPI is 38.3% over this period, compared with 31.6% as measured by the RPIJ. The use of the Carli formula has therefore added 6.7 percentage points to the change in prices over the last 10 years. A larger version of the chart can be viewed by clicking on it (HTML version only).
Table C shows the RPI and RPIJ 1-month and 12-month rates and index values for the last year.
|RPI Index 1 (UK, 1987 = 100)||RPIJ Index (UK, 1987 = 100)||RPI 12-month1 rate||RPIJ 12-month rate||RPI 1-month1 rate||RPIJ 1-month rate|
The RPI has been de-designated as a National Statistic.
For users who want to understand the causes of the difference between the CPI and RPI, please see Table 5 in the Consumer Price Inflation Reference Tables of the February Release on the ONS website.
Table D outlines where data for all consumer price inflation statistics can be found.
|Statistical Bulletin||Detailed Briefing Note||Reference Tables (Excel Format)||Time Series Dataset|
|CPI||H, T, D2||H, D||H, T, D||T, D|
|CPIH||H, T, D||H||H, T, D||T, D|
|RPIJ||H, T||H||H, T||T|
|RPI 1||H, T||H, D||H, T, D||T, D|
|RPIX 1||:||H||H, T||T|
|RPIY 1||:||H||H, T||T|
|SARPIY 1||:||H||H, T||T|
|TPI 1||:||H||H, T||T|
|RPI Pensioner Indices 1||:||:||H, T||T|
|International Comparisons||:||:||H, T||T|
These statistics are not National Statistics.
H = Latest headline figures, D = Detailed data (including disaggregations), T = Time series data.
Seasonally Adjusted Retail Prices Index Excluding Mortgage Interest Payments and Indirect Taxes (SARPIY)
Due to a lack of user interest and the investment of resources required to continue its production, ONS is proposing to stop publication of SARPIY from May 2014 onwards. Users are invited to provide information on the uses they make of SARPIY and their views on this proposal via email@example.com or +44 (0) 1633 456900 before 01 May 2014. These views will be taken into consideration and a decision will be announced in the 'Consumer Price Inflation, April 2014' publication on 20 May 2014. This proposal does not impact on any other RPI-based series.
Consumer Price Inflation Weights
In line with usual practice, the February 2014 indices include the planned updates to the higher level RPIJ and RPI weights, and to the CPI, CPIH, RPIJ and RPI item weights. Additional details of the updated weights for 2014 will be published in an article on 25 April 2014.
Estimated Effect of the Budget on Consumer Price Inflation
An article describing the estimated effects on consumer price inflation of duty and tax changes announced in the Budget will be published on 31 March 2014.
Understanding and accessing the data
A full description of how consumer price indices are compiled is given in the Consumer Price Indices Technical Manual. This is supplemented by other technical articles, historic data etc available from the guidance and methodology section of the ONS website.
A more detailed quality report for this statistical bulletin is available. The report assesses consumer price inflation statistics against standard dimensions of quality such as relevance, accuracy and accessibility. The report was last updated in October 2013.
mini Triennial Review (1.75 Mb Pdf)
of the CPI and RPI Central Collection of Prices is available.
The most efficient way to access the latest consumer price inflation data and briefing on the ONS website is via the CPI key figure on the homepage.
In response to user feedback, all consumer price inflation data are available in one location. The Consumer Price Inflation Reference Tables (1.32 Mb Excel sheet) are provided via an excel file.
To help users further, very detailed CPI data are now available including the individual price quotes and item indices that underpin the CPI. Please note, the data that are published are at a level which means that no individual retailer or service provider will be able to be identified. Previously the data published covered January 1996 to September 2013. The data for October to December 2013 are also now available. These data are updated once a quarter with around a two month lag with the latest CPI publication. For example, the data will next be updated when the May 2014 CPI is published on 17 June 2014, at which point the detailed data published will be extended to March 2014.
Internationally, the CPI is known as the Harmonised Index of Consumer Prices (HICP). HICPs are calculated in each Member State of the European Union according to rules specified in a series of European regulations developed by the European Commission (Eurostat) in conjunction with the EU Member States. Eurostat released figures for the Harmonised Index of Consumer Prices (HICP) for the month of February 2014 for EU Member States, together with an EU average, on 17 March 2014. A summary of the latest European data is available from Eurostat’s database tables. Further information on HICP for the European Union, Euro area and other EU Member States is available from Eurostat's HICP web page.
Methods - CPI and other measures of inflation
The CPI, CPIH, RPIJ and RPI are compiled using the same underlying price data, based on a large and representative selection of almost 700 individual goods and services for which price movements are measured in around 150 randomly selected areas throughout the UK. Around 180,000 separate price quotations are used every month to compile the indices. The outlets in which the prices are collected are selected randomly. Expenditure weights are held constant for one year at a time.
The selection of goods and services that are priced to compile these indices is reviewed annually. The contents of the 2014 basket are described in an article Consumer Price Inflation: The 2014 Basket of Goods and Services (138.6 Kb Pdf) . The expenditure weights used to compile the indices are also updated each year. Additional details of the updated weights for 2013 are available from the National Statistics website in an article published on 26 April 2013 entitled Consumer Prices Index and Retail Prices Index: Updating Weights for 2013. An article detailing the updated weights for 2014 is due to be published on 25 April 2014.
Rates of change for the CPI and CPIH are calculated from unrounded index levels, rather than from the published indices, which are rounded to one decimal place. The use of unrounded indices increases the accuracy of the calculation. The unrounded index levels for the CPI and CPIH are available on request. By contrast, rates of change for the RPI and RPIJ are calculated from the published rounded indices.
Further information on the methods used to construct the CPI, CPIH, RPI and RPIJ, including differences in the methods used for each index can be found in the Consumer Price Indices Technical Manual. 'Users and uses of consumer price inflation statistics' provides further details of how consumer price statistics are used more generally.
On 15 October 2013, ONS published a revisions policy for its suite of consumer price inflation statistics. The policy re-affirms the existing practices for CPI and RPI and sets out the policies for the new CPIH and RPIJ measures.
In summary; CPI, CPIH and RPIJ are revisable in theory though revisions only occur under exceptional circumstances. The RPI is never revised once published.
This bulletin includes the February 2014 data, collected on 18 February 2014. Future publication dates for this statistical bulletin are available to January 2016 (the publication of the December 2015 inflation figures). Publication dates from February 2015 onwards are provisional.
Details of the policy governing the release of new data are available from the Media Relations Office. Also available is a list of the names of those given pre-release access to the contents of this release.
Consumer price inflation for March 2013 to March 2014 will be published on 15 April 2014.
Tel: Luke Croydon + 44 (0) 845 6041858
Out of hours media line + 44 (0) 7867 906553
Consumer Price Inflation recorded message (available after 9.45am on release day):
Tel: + 44 (0) 800 0113703
Consumer Price Inflation Enquiries:
Tel: + 44 (0) 1633 456900
Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: firstname.lastname@example.org
These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.
|Philip Gooding||+44 (0)1633 455896||Prices, ONSemail@example.com|