Consumer Price Indices measure the change in the general level of prices charged for goods and services bought for the purpose of household consumption in the UK. A convenient way to understand the nature of these indices is to envisage a very large shopping basket comprising all the different goods and services typically bought by households. As the prices of individual items in this basket vary, the total cost of the basket will also vary. The CPI and RPI measure changes in this total cost.
The CPI is the main UK domestic measure of consumer price inflation for macroeconomic purposes. It forms the basis for the Government’s target for inflation that the Bank of England’s Monetary Policy Committee (MPC) is required to achieve. Since April 2011 the CPI has also been used for the indexation of benefits, tax credits and public service pensions although in his 2012 Autumn Statement, the Chancellor of the Exchequer announced that certain working age benefits and tax credits will increase by 1% for each of the next three years.
This section shows the 1-month and 12-month percentage change (the amount by which the figures have increased or decreased compared with a month ago and a year ago respectively). Figure A shows the 12-month percentage change for the CPI. Table A shows the CPI index values plus the 1-month and 12-month percentage changes.
The CPI fell by 0.5% between December 2012 and January 2013, the same as the decrease recorded between December and January a year earlier. This 1-month change is within the normal range for a December to January movement. Between 1996 and 2011, the 1-month change between December and January has varied between falls of 0.9% and a rise of 0.1%.
The CPI grew by 2.7% between January 2012 and January 2013. This is unchanged from the 12-month rate between December 2011 and December 2012.
|Index1 (UK, 2005 = 100)||Percentage change over 1 month||Percentage change over 12 months|
This section explains the change in the CPI between the latest two months. Table B shows the 1-month percentage change for each of the CPI divisions. Figure B shows the contribution of each division to the overall 1-month change.
The CPI fell by 0.5% between December 2012 and January 2013. The largest downward contribution to the 1-month change came from:
clothing & footwear: prices, overall, fell by 5.4% between December 2012 and January 2013, contributing approximately -0.4 percentage points to the total CPI 1-month change. Garments accounted for most of the downward contribution.
By far the largest upward contribution to the 1-month change between December 2012 and January this year came from:
alcoholic beverages & tobacco: prices, overall, rose by 4.3% between December 2012 and January 2013, contributing approximately 0.2 percentage points to the total CPI 1-month change. Alcoholic drinks (particularly spirits and wine) accounted for most of the downward contribution.
|Food & non-alcoholic beverages||0.1|
|Alcohol & tobacco||4.3|
|Clothing & footwear||-5.4|
|Housing & household services||-0.1|
|Furniture & household goods||-2.3|
|Recreation & culture||-0.1|
|Restaurants & hotels||0.0|
|Miscellaneous goods & services||-0.7|
|CPI All Items||-0.5|
This section explains how the CPI 12-month rate (this month’s CPI compared with the CPI for the same month a year ago) has changed between the latest two months. Figure C shows the contribution of each CPI division to the overall change in the 12-month rate.
The change in the CPI 12-month rate is calculated by comparing the price changes between the latest two months and the same two months a year ago. The CPI fell by 0.5% between December 2012 and January 2013, the same fall as occurred between these months a year earlier. This means the CPI remained at 2.7% for the fourth month in succession.
While there was no change overall to the CPI 12-month rate, at a more detailed level, there were some upward and downward pressures on the index.
The largest upward pressures to the CPI 12-month rate between December 2012 and January 2013 came from:
alcoholic beverages & tobacco: prices, overall, rose by 4.3% between December 2012 and January 2013, compared with a smaller rise of 1.9% a year earlier. This contributed approximately 0.1 percentage points to the change in the CPI 12-month rate. Almost all of the upward pressure came from alcoholic drinks with prices recovering after Christmas sales.
food & non-alcoholic beverages: prices, overall, rose by 0.1% between December 2012 and January 2013, compared with a fall of 0.4% a year earlier. This contributed approximately 0.1 percentage points to the change in the CPI 12-month rate. Most of the upward push came from vegetables (with reports of low UK stock levels resulting in more produce being sourced from the continent), fruit, and bread & cereals. These were partially offset by a downward push from meat.
The largest downward pressures to the CPI 12-month rate between December 2012 and January 2013 came from:
miscellaneous goods & services: prices, overall, fell by 0.7% between December 2012 and January 2013, compared with a smaller fall of 0.1% a year ago. This contributed approximately -0.1 percentage points to the change in the CPI 12-month rate. Fees for financial services (such as money transfers) and sales of some appliances and products for personal care (including baby wipes and toothbrushes) pushed inflation downwards.
clothing & footwear: prices, overall, fell by 5.4% between December 2012 and January 2013, compared with a smaller fall of 4.9% a year ago. This contributed approximately -0.1 percentage points to the change in the CPI 12-month rate. Most of the downward pressure came from garments.
Whilst it had little effect overall on the headline CPI, there were some notable movements in the transport sector. Air fares pushed inflation upwards with prices falling by less than they usually do in January following the lower than usual price increases in December 2012. This upwards push was partially counterbalanced by downward pressures from the majority of the remainder of the transport sector – notably car sales and motor fuels.
This section explains how the CPI this month has changed compared with the same month a year ago. Table C shows the 12-month percentage change for each of the CPI divisions. Figure D shows the contribution of each division to the overall 12-month rate.
The most significant upward contributions to the CPI 12-month rate to January 2013 came from:
housing & household services: which contributed around 0.5 percentage points, with the majority of the contribution split between rents and home fuel bills.
food & non-alcoholic beverages: which contributed around 0.5 percentage points, with the contribution spread across a number of categories.
|Food & non-alcoholic beverages||4.2|
|Alcohol & tobacco||8.5|
|Clothing & footwear||0.2|
|Housing & household services||3.5|
|Furniture & household goods||0.8|
|Recreation & culture||0.5|
|Restaurants & hotels||3.2|
|Miscellaneous goods & services||1.4|
|CPI All Items||2.7|
This section shows for other measures of CPI inflation the percentage change over 12-months and the change in the 12-month rate between last month and this month (ie the amount by which the indices have increased or decreased over the year and the change in that relationship between the latest two months).
Figure E compares the 12-month percentage change for the CPI with the 12-month percentage change for these other measures.
The CPIY is the same as the all items CPI except that it excludes price changes which are directly due to changes in indirect taxation (such as VAT).
In the year to January 2013, the CPIY grew by 2.7%, unchanged for the fourth month in a row. Therefore, the CPIY and CPI 12-month rates were both unchanged between December 2012 and January 2013. There were no changes to indirect taxation that impacted on the CPI between those months.
The CPI-CT is the same as the CPI except that tax rates are kept constant at the rates they were in the base period (currently January 2012) and vehicle excise duty and television licence fees are excluded.
In the year to January 2013, CPI-CT grew by 2.5%, unchanged from December 2012. Therefore, both CPI-CT and CPI 12-month rates were unchanged.
The RPI is the most long standing measure of inflation in the UK. The RPI, like the CPI, measures inflation with reference to the changing cost of a fixed basket of goods and services. Following a consultation on options for improving the RPI, the National Statistician, has concluded that the Carli formula used to produce the RPI does not meet international standards.
This section compares the percentage change over 12-months for the RPI with the comparable change for the CPI and explains any significant differences between the two. Figure F charts the 12-month rates for the CPI and RPI.
In the year to January 2013, the all items RPI rose by 3.3%, up from 3.1% in December 2012. The RPI 12-month rate has therefore increased by 0.2 percentage points between December 2012 and January 2013 compared with no change in the CPI 12-month rate between the same two months.
Table 5 at the back of the bulletin identifies the main factors contributing to the differences between the 12-month rates for the CPI and the RPI. The rise in the RPI 12-month rate compared with no change in the CPI 12-month rate between December 2012 and January is mainly due to:
Other differences including weights: which increased the RPI 12-month rate relative to the CPI 12-month rate by 0.12 percentage points between December 2012 and January 2013. The effect came mainly from weight changes particularly in insurance, financial services, clothing & footwear and furniture & furnishings, partially offset by air fares.
Formula effect: which increased the RPI 12-month rate relative to the CPI 12-month rate by 0.05 percentage points between December 2012 and January 2013. The effect came mainly from clothing & footwear and miscellaneous goods & services.
Partially offsetting this widening effect was:
Other differences in coverage: which increased the CPI 12-month rate relative to the RPI 12-month rate by 0.02 percentage points between December 2012 and January 2013.
This section shows for other measures of RPI inflation the percentage change over 12-months and the change in the 12-month rate between last month and this month (ie the amount by which the indices have increased or decreased over the year and the change in that relationship between the latest two months).
Figure G compares the 12-month percentage change for the RPI with the 12-month percentage change for these other measures.
The RPIX is the same as the all items RPI except for mortgage interest payments, which are excluded from RPIX.
In the year to January 2013, the RPIX grew by 3.3%, up from 3.0% in December 2012. Therefore, the RPIX 12-month rate grew by 0.3 percentage points compared to a growth of 0.2 percentage points in the RPI 12-month rate. Rounding was the main cause of this difference.
The RPIY is the same as the all items RPI except that it excludes price changes which are directly due to changes in indirect taxation (such as VAT) and mortgage interest payments.
In the year to January 2013, the RPIY grew by 3.3%, up from 3.1% in December 2012. Therefore, the RPIY and RPI 12-month rates both rose by 0.2 percentage points between December and January.
This section highlights notable movements and trends in the CPI and RPI and places them in historical context.
|Annual rate +2.2%, down from +2.8% last month|
|Health||Also +2.2% in January 2009|
|Last lower in December 2008 (+2.1%)|
|Miscellaneous Goods & Services||Annual rate +1.4%, down from +2.0% last month|
|Last lower in November 2009 (+1.0%)|
|Seasonal Food||Annual rate +7.4%, up from +5.8% last month|
|Last higher in December 2010 (+8.5%)|
CPI and RPI Reference Tables, January 2013: (918 Kb Excel sheet) This spreadsheet pulls together the tables that were previously published in the old style Consumer Price Indices Statistical Bulletin and Focus on Consumer Prices publication. A correlation index is included to show the old and new naming conventions and where the tables were previously published, for example: RPI All items 1947-2012 or RP02 and Table 4.1 in Focus is now the new Table 20.
National Statistician's announcement on the RPI consultation
Following a consultation on options for improving the Retail Prices Index (RPI), the National Statistician, Jil Matheson, has concluded that the formula used to produce the RPI does not meet international standards and recommended that a new index be published.
The National Statistician’s consultation was prompted by the need to address the gap between the estimates produced by the RPI and the Consumer Prices Index (CPI). The ONS research programme found that use of the arithmetic formulation (known as the ‘Carli’ index formula) in the RPI is the primary source of the formula effect difference between the RPI and the CPI, and, that this formulation does not meet current international standards. Therefore, a new RPI-based index will be published from March 2013 using a geometric formulation (Jevons), known as RPIJ, in place of the Carli.
In developing her recommendations the National Statistician also noted that there is significant value to users in maintaining the continuity of the existing RPI’s long time series without major change, so that it may continue to be used for long-term indexation and for index-linked gilts and bonds in accordance with user expectations.
Therefore, while the arithmetic formulation would not be chosen were ONS constructing a new price index, the National Statistician recommended that the formulae used at the elementary aggregate level in the RPI should remain unchanged. The Board of the UK Statistics Authority has accepted these recommendations.
The National Statistician has also recommended that improvements to the measurement of private housing rents from using an alternative data source should be implemented in the February 2013 RPI, CPI and CPIH indices (published on 19 March 2013). The Board of the UK Statistics Authority has accepted this recommendation and the Bank of England has confirmed that changing the data source for private rents does not constitute a fundamental change to the RPI and is not likely to be materially detrimental to the holders of index-linked gilts. Therefore, the change will go ahead.
New inflation index including owner occupiers’ housing costs to be launched
On 2 November, ONS announced that a new additional measure of consumer price inflation will be launched which includes owner occupiers’ housing (OOH) costs. The new index, which will initially be known as CPIH, will measure OOH costs using the rental equivalence method. This method uses changes in rental prices to measure the costs of owning, living in and maintaining a property. CPIH will be introduced in March 2013 at the same time as the annual CPI/RPI basket of goods and services is updated.
ONS published its full response to the public consultation on OOH (together with the Consumer Prices Advisory Committee's annual report for 2012) on 13 November 2012.
Changes to the Consumer Price Statistics Bulletin
To coincide with the launch of the new CPIH measure of inflation and the changes resulting from the RPI consultation, the format of the Consumer Price Statistics Bulletin will be changing from March 2013. ONS’s intention is to focus on the key figures and improve the depth of analysis on topical issues and long term trends. If you have any comments or points you would like ONS to consider while it is re-designing the bulletin then please contact ONS at email@example.com.
Update to higher level CPI weights
In line with usual practice, the January 2013 CPI dataset reflects the planned update to the published CPI weights. The new weights can be found in table 3 attached to the PDF version of this bulletin, tables 3 and 10 of the CPI and RPI Reference Tables (918 Kb Excel sheet) and also via table 1.4 of the CPI Time Series Dataset.
Inflation for January 2011 to January 2013 will be published on 12 February 2013. CPI and RPI inflation rates between February 2012 and January 2013 were 2.1% and 2.5% respectively. Inflation rates for February 2012 to February 2013 will take account of price changes between January 2013 and February 2013.
RPI and CPI Weights
In line with usual practice, the February 2012 indices will include the planned updates to the higher level RPI weights, and to the CPI and RPI Item weights.
Update to the CPI and RPI Basket
The goods and services that are priced to construct the CPI and RPI are reviewed annually to ensure that the indices reflect the latest spending patterns by customers in the UK. Changes to the basket of goods and services this year, effective from the February indices, will be described in an article to the published on the National Statistics website on 12 March 2013.
The CPI is the main UK domestic measure of consumer price inflation for macroeconomic purposes. It forms the basis for the Government’s target for inflation that the Bank of England’s Monetary Policy Committee (MPC) is required to achieve. Since April 2011 the CPI has also been used for the indexation of benefits, tax credits and public service pensions. However from April 2013 certain working age benefits and tax credits will increase by 1% for each of the next three years.
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 Eurostat in conjunction with the EU Member States. HICPs are used to compare inflation rates across the European Union. Since January 1999, the HICP has also been used by the European Central Bank (ECB) as the measure of price stability across the euro area.
The CPI and the 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 the CPI and RPI is reviewed annually. The contents of the 2012 basket are described in an article Consumer Prices Index and Retail Prices Index: the 2012 Basket of Goods and Services (274.7 Kb Pdf) . The expenditure weights used to compile the indices are also updated each year. Additional details of the updated CPI and RPI weights for 2012 are available from the National Statistics website in an article published on 24 April 2012 entitled Consumer Prices Index and Retail Prices Index: Updating Weights for 2012.
Rates of change for the CPI 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 are available on request. By contrast, rates of change for the RPI are calculated from the published rounded indices.
Once the RPI indices are published they are never revised. CPI indices are revisable although the only time the CPI all items index has been revised was when the index was re-referenced to 2005=100, which took place with the publication of the January 2006 indices.
The CPI’s coverage of goods and services was extended in stages in the areas of health, education, childcare and insurance, with effect from the January 2000, 2001 and 2002 indices. In 2000, there was also a change to the population basis for the weights which was broadened from private households to include expenditure by foreign visitors and residents of institutional households. Further details can be found in a series of articles in the CPI methodology section of the Office for National Statistics website.
The official CPI series starts in 1996 but estimates for earlier periods are available back to 1988. These estimates are broadly consistent with data from 1996 but should be treated with some caution. An article about historical estimates (106 Kb Pdf) provides more detail.
RPI data are available back to 1947 but have been re-referenced on several occasions since then, generally accompanied by changes to the coverage and/or structure of the detailed sub-components. Details of these changes are given in Appendices 1 and 2 of the Consumer Price Indices Technical Manual (754.3 Kb Pdf) .
Other measures of inflation – main uses and methodological details
Detailed explanations of the main uses and methodology used to construct the ‘other measures of inflation’ included within this statistical bulletin and how they differ from the CPI can be found in Chapters 9 and 10 of the
Consumer Price Indices Technical Manual (754.3 Kb Pdf)
. In addition this article 'How ONS consumer price statistics are used' provides further details of how consumer price statistics are used more generally.
All items Retail Prices Index (RPI): the RPI is the most long-standing general purpose measure of inflation in the UK. Historically the uses of the RPI include the indexation of various prices and incomes and the uprating of pensions, state benefits and index-linked gilts, as well as the revalorisation of excise duties. Please note, though, that since April 2011 the CPI has been used to uprate benefits, tax credits and public service pensions. In January 2013, the National Statistician concluded that the Carli formula used to produce the RPI does not meet international standards.
The main differences between the CPI and RPI are:
population base: CPI includes all UK private and institutional households and foreign visitors to the UK. The RPI includes private households only and excludes the highest income households and pensioner households mainly dependent on state benefits; these excluded private households account for around 13% of all UK household expenditure
item coverage: the most significant difference is that the CPI excludes a number of items relating to housing costs (such as mortgage interest payments, house depreciation and council tax) that are included in the RPI
index methodology – formula: the CPI mainly uses the geometric mean whereas the RPI uses Carli, the arithmetic mean to combine individual prices at the first stage of aggregation. This includes the Carli formula which the National Statistician has concluded doesn't meet the international standards
item coding: the CPI uses a standard international classification system whereas the RPI uses a system unique to itself and not used elsewhere. The different approaches reflect the fact that the CPI is used to compare inflation rates across Europe so a standard framework is required; the RPI is mainly used within the UK only
Here is a breakdown of the differences between the CPI and RPI (62.9 Kb Pdf) annual inflation rates.
Also available is an explanation of the increased impact that the different formulae used to construct the CPI and RPI (61 Kb Pdf) had on the indices during 2010.
All items Retail Prices Index excluding mortgage interest payments (RPIX): this index is the same as the all items RPI but it excludes the mortgage interest payments component
All items Retail Prices Index excluding mortgage interest payments and indirect taxes (RPIY): is an index designed to measure movements in ‘core’ prices as the index excludes price changes which are directly due to changes in indirect taxation (for example VAT; excise duties on tobacco, alcohol and petrol; local authority taxation; vehicle excise duty; and television licence fees) and mortgage interest payments. The purpose of the index is to obtain a better indication of inflationary pressures at times when prices are directly influenced by government-driven changes
Consumer Prices Index excluding indirect taxes (CPIY): is an index designed to measure movements in ‘underlying prices’ as it excludes price changes which are directly due to changes in indirect taxation (for example VAT; excise duties on tobacco, alcohol and petrol; vehicle excise duty; and television licence fees). As with the RPIY, its main purpose is to obtain a better indication of inflationary pressures at times when prices are directly influenced by government-driven changes
Consumer Prices Index at constant tax rates (CPI-CT): is an index where tax rates are kept constant at the rates as they were in the base period (currently January 2012) and which excludes vehicle excise duty and television licence fees. The analytical value of the CPI-CT is when it is compared with the CPI; differences in the monthly and annual rates of change between the two indices provide an indication of the impact of tax changes on the CPI
The most efficient way to access the latest CPI and RPI data and briefing on the new website is via the CPI or RPI key figures on the homepage.
In response to user feedback, all CPI and RPI data is available in one location. These
CPI and RPI Reference Tables (918 Kb Excel sheet)
are provided via a 'printer friendly' excel file.
To further help users, very detailed CPI data are now available including the individual price quotes and item indices that underpin the CPI. Please note that the data that are published are at a level which means that no individual retailer or service provider will be able to be identified. The data published covers January 1996 to September 2012. 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 February CPI is published on 19 March 2013, at which point the detailed data published will be extended to December 2012.
This bulletin includes the January 2013 data, collected on 15 January 2013. Future publication dates (43.6 Kb Pdf) for this Statistical Bulletin are available (now includes dates to January 2014).
The European Commission (Eurostat) releases figures for the Harmonised Index of Consumer Prices (HICP) for the month of January 2013 for EU Member States, together with an EU average, on 22 February 2013. Further information on HICP for the European Union, Eurozone and other EU Member States is available from Eurostat's HICP web page.
A more detailed quality report (119.3 Kb Pdf) for this statistical bulletin is available. The report assesses the CPI and RPI against standard dimensions of quality such as relevance, accuracy and accessibility. The report was last updated in December 2011.
The mini Triennial Review (1.75 Mb Pdf) of the CPI and RPI Central Collection of Prices is available.
A full description of how the CPI and RPI are compiled is given in the Consumer Price Indices Technical Manual. (754.3 Kb Pdf)
Further information on the CPI and RPI, including details of the methodology used to construct the indices, articles, historic data etc. is available on the Consumer Price Indices Taxonomy page.
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 (359 Kb Pdf) to the contents of this release.
Bank and Treasury officials were informed at 5pm on the Friday before publication that an open letter was not needed this month between the Governor of the Bank of England and the Chancellor of the Exchequer.
In line with the Consumer Price Indices Pre-Release arrangements, an advanced estimate of the CPI was provided to the Governor of the Bank of England and the Chancellor of the Exchequer 3.5 working days ahead of publication. The Governor shared this information with the MPC, and officials present at the MPC policy meeting, on Wednesday 6 February 2013.
Andrew Dilnot, Chair of the UK Statistics Authority, reported to the House of Commons Public Administration Select Committee in September 2012 that, once the current price indices work programme had concluded, the Authority would undertake a wider review of the governance arrangements and structures supporting the production of price indices to ensure that these statistics best meet user needs in the future.
Accordingly, once the National Statistician’s recommendations have been implemented in March 2013, the Authority will appoint an independent expert to lead this broader review, and to report to the Board of the Authority. The Authority will publish a further statement about the review in due course.
As with all National and candidate National Statistics, the new suite of inflation statistics will be subject to independent assessment by the Authority under the supervision of the Authority’s Head of Assessment. The Board of the Authority has asked for this statutory assessment to be completed by summer 2013.
In addition, in light of the National Statistician’s work programme and the methodological shortcomings now known to be associated with the RPI, the Board of the Authority has asked that these statistics should be re-assessed immediately to determine whether or not they merit continued designation as National Statistics.
Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.
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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.
|Richard Campbell||+44 (0)1633 651536||Prices, ONSemail@example.com|