Consumer price inflation, UK: December 2015

Price indices, percentage changes and weights for the different measures of consumer price inflation.

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Release date:
19 January 2016

Next release:
16 February 2016

1. Main points

  • The Consumer Prices Index (CPI) rose by 0.2% in the year to December 2015, compared with a 0.1% rise in the year to November 2015

  • Although this is the first month since January 2015 for which the rate has exceeded 0.1%, this continues the trend since early 2015 of the rate being very close to zero

  • Movements in transport costs, particularly air fares and to a lesser extent motor fuels, were the main contributors to the rise in the rate

  • Downward pressures from prices for alcohol and tobacco along with food and non-alcoholic beverages partially offset the rise

  • CPIH (not a National Statistic) grew by 0.5% in the year to December 2015, up from 0.4% in November 2015

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2. A brief description of Consumer Price Inflation

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. A 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. An infographic explains how consumer price inflation is calculated. 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 December 2015, so the 12-month rate measures changes in prices between December 2014 and December 2015.

A range of measures of consumer price and other price inflation are published. A tale of many price indices summarises information on the different measures.

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3. Consumer Prices Index (CPI)

What is the CPI?

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 (100.5 Kb Pdf).

Latest figure and long-term trend

The CPI 12-month rate (the amount prices change over a year) between December 2014 and December 2015 stood at 0.2%, a small increase compared with November 2015, when the rate was 0.1%. Although this is the first month since January 2015 for which the rate has exceeded 0.1%, this continues the trend since early 2015 of the rate being very close to zero. A rate of 0.2% means that a basket of goods and services that cost £100.00 in December 2014 would have cost £100.20 in December 2015.

As the rate has been very close to zero since early 2015, taken as a whole, households have experienced very little change in prices compared with the same months in 2014. Looking across the year overall, prices for transport costs, food and non-alcoholic beverages and (to a lesser extent) recreational and cultural goods and services have had a downward pull on the rate of inflation. These have been counterbalanced by an upward pull from price movements for other goods and services, most notably restaurant and hotel bills, and education costs such as university tuition fees.

Figure A shows the contributions to the CPI 12-month rate in December 2015 compared with the contributions to the 12-month rate a year earlier. A larger version of the chart can be viewed by clicking on it (HTML version only).

Figure B shows the CPI 12-month rate over the last 10 years. Table A shows the CPI 1-month rate (the amount prices change between 2 consecutive months), 12-month rate and index values for the last year. A larger version of the chart can be viewed by clicking on it (HTML version only).

Consumer Prices Index (CPI): What are the main movements?

This section explains which goods and services had the biggest impact on the change to the 12-month rate between November and December 2015 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 2 consecutive months. An alternative, and equally valid, approach is to calculate it by comparing the price change between the latest 2 months and the price change between the same 2 months a year ago. Explaining the contribution to change in the 12-month rate (37.1 Kb Pdf) is a diagram explaining the calculation.

The CPI increased by 0.1% between November and December 2015, having been unchanged between the same 2 months a year earlier. The 1-month movement was therefore 0.1 percentage points higher this year compared with a year ago, leading to a rise in the CPI 12-month rate.

Between November and December 2015, the only substantial upward contribution to the change in the CPI 12-month rate came from:

  • transport: prices, overall, increased by 1.8% between November and December this year, compared with a fall of 0.2% between the same 2 months a year ago. The upward effect on the change in the 12-month rate came principally from air fares and to a lesser extent motor fuels. Air fares increased by 46% between November and December 2015 compared with 19% between the same 2 months a year earlier. This is the largest November to December price increase since 2002, although it is important to note that air fare prices are highly variable. November to December rises in excess of 40% were also seen in 2009 to 2011. Motor fuel prices fell by less than they did a year ago, meaning that they had an upward contribution to the change in the 12-month rate. Petrol prices fell by 3.4 pence per litre this year compared with a larger fall of 6.1 pence a year ago, while diesel fell by 2.3 pence this year compared with 4.8 pence a year ago

The largest downward contributions to the change in the CPI 12-month rate between November and December 2015 came from:

  • food and non-alcoholic beverages: prices, overall, fell by 0.2% between November and December this year, compared with a rise of 0.3% between the same 2 months a year ago. Price changes for cauliflower and potato crisps had the largest downward contribution to the change in the 12-month rate

  • alcoholic beverages and tobacco: prices, overall, fell by 1.3%, compared with a smaller fall of 0.2% between the same 2 months a year earlier. Wine and spirits were the main contributors to the change in the 12-month rate, with both showing larger price drops than in the same period a year ago

Figure C shows the contributions to change 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).

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4. CPIH

CPIH is currently undergoing re-assessment to evaluate the extent to which it meets the professional standards set out in the Code of Practice for Official Statistics. CPIH was first assessed in 2013. In August 2014 its National Statistics status was removed pending work to improve the methods for measuring owner occupiers’ housing costs in the index. Full details can be found on the UK Statistics Authority website and in an explanatory note (313.9 Kb Pdf) on our website. The improvements from the resulting development work were introduced as part of the February 2015 dataset with the historical series revised back to 2005. Further information on the changes is available in 2 articles: Improvements to the measurement of Owner Occupiers’ Housing Cost and Private Housing Rental Prices (2.48 Mb Pdf) and Revising the weight of Owner Occupiers’ Housing in CPIH (197.4 Kb Pdf) .

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 would make the index less suitable for a measure of consumption. OOH currently accounts for 17.8% of the expenditure weight of CPIH. This compares with a weight of 19.5% 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 December 2015, the 12-month rate (the rate at which prices increased between December 2014 and December 2015) for CPIH stood at 0.5%, up from 0.4% in November 2015. The difference between the CPI and CPIH annual rates in December 2015 was 0.3 percentage points, the same as the difference in November 2015.

Owners occupiers' housing costs increased by 0.2% between November and December 2015, the same as between these months a year earlier. This means that it had a very small impact on the change on the CPIH 12 month rate between the two months.

Figure D shows the CPIH and OOH component 12-month rates since January 2006 (the earliest date for which the official CPIH 12-month rate can be calculated). The CPI 12-month rate has been included for comparative purposes. Table B shows the CPIH and OOH component 1-month and 12-month rates and index values for the last year.

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5. Retail Prices Index (RPI) and RPIJ

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 (100.5 Kb Pdf).

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 2 indices. Detailed goods and services indices are not produced for RPIJ.

In December 2015, the 12-month rate for RPIJ stood at 0.5%, up from 0.3% in the year to November 2015.

The RPI 12-month rate for December 2015 stood at 1.2%, meaning that it was 0.7 percentage points higher than it would have been had it used formulae that meet international standards.

Figure E 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 but the difference has increased to an average of 0.6 percentage points over the last 3 years. Cumulatively, inflation as measured by the RPI is 34.3% over the 10-year period, compared with 27.2% as measured by RPIJ. The use of the Carli formula has therefore added 7.1 percentage points to the change in prices over the last 10 years.

Table C shows the RPI and RPIJ 1-month and 12-month rates and index values for the last year.

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.

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6. Guide to data

Table D outlines where data for all consumer price inflation statistics can be found.

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7 .Background notes

  1. News

    Advisory Panels for Consumer Price Statistics

    In June 2015 the UK Statistics Authority announced the formation of 2 independent advisory panels on consumer price statistics: a technical panel to advise the National Statistician on technical aspects of the statistics; and a stakeholder panel to provide advice on the uses and applications of price indices. The announcement followed a review, led by Professor Sir Adrian Smith, which considered matters relating to the governance arrangements and structures underpinning the production of consumer price statistics.

    On 27 November, the 2 panels met for the first time in a joint session. Minutes and papers were published on 14 December on our website. The panels will meet again on 22 January 2016.

    Re-referencing of CPI and CPIH indices

    From the release of January consumer price inflation data in February 2016, CPI and CPIH indices will be re-referenced and published with 2015=100. Regular re-referencing of indices is methodological good practice as it avoids rounding issues that can arise from small index values. Published CPI and CPIH inflation rates are calculated from unrounded indices, meaning that re-referencing will not impact on published inflation rates. Re-referencing will result in revisions to the CPI and CPIH indices. Full back series for each of the revised indices will be published shortly before publication of the January data. Re-referencing does not impact on RPI and RPIJ. Further details will be included in future CPI statistical bulletins. For more information please contact cpi@ons.gov.uk.

    Correspondence with the Bank of England

    Section 21 of the Statistics and Registration Service Act 2007 requires that, prior to making any change to the coverage or the basic calculation of the RPI, the UK Statistics Authority must consult the Bank of England as to whether any proposed change constitutes a fundamental change in the index which would be materially detrimental to the interests of the holders of relevant index-linked gilt edged securities. On 17 November 2015, ONS informed the Bank of England of the annual update to the basket of RPI items, and a review of the location boundaries wherein prices are collected. On 17 December 2015, the Bank concluded that these changes neither constituted a fundamental change in the index and nor was it likely to be materially detrimental to the holders of index-linked gilts.

  2. Understanding and accessing the data

    A full description of how consumer price indices are compiled is given in the Consumer Price Indices Technical Manual (674.4 Kb Pdf). This is supplemented by infographics and textual information available from the guidance and methodology section of our website.

    A more detailed quality report (141.9 Kb Pdf) 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.

    The 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 our website is via the CPI key figure on the homepage.

    In response to user feedback, all consumer price inflation data are available in 1 location. The Consumer Price Inflation Reference Tables 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. The data published covers January 1996 to September 2015. These data are updated once a quarter with around a 2-month lag with the latest CPI publication. For example, the data will next be updated when the February CPI is published on 22 March 2016, at which point the detailed data published will be extended to December 2015.

    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 releases figures for the Harmonised Index of Consumer Prices (HICP) for the month of December 2015 for EU member states, together with an EU average, on 19 January 2016. 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.

  3. 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 around 700 individual goods and services for which price movements are measured in around 140 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 1 year at a time.

    The selection of goods and services that are priced to compile these indices is reviewed annually. The contents of the 2015 basket are described in an article Consumer Price Inflation: The 2015 Basket of Goods and Services (139.4 Kb Pdf). The expenditure weights used to compile the indices are also updated each year. Additional details of the updated weights for 2015 are available in an article published on 24 March 2015 entitled Consumer Price Inflation: 2015 Weights (431.9 Kb Pdf).

    Rates of change for the CPI and CPIH are calculated from unrounded index levels, rather than from the published indices which are rounded to 1 decimal place. The use of unrounded indices increases the accuracy of the calculation. The unrounded index levels for the CPI and CPIH are available from tables 64 and 65 of the Consumer Price Inflation Reference Tables. 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 (674.4 Kb Pdf). Users and uses of consumer price inflation statistics (100.5 Kb Pdf) provides further details of how consumer price statistics are used more generally.

  4. Revisions policy

    On 15 October 2013, a revisions policy (49.6 Kb Pdf) was published for the suite of consumer price inflation statistics. The policy reaffirms 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.

  5. Publication policy

    This bulletin includes the December 2015 data, collected on and around 15 December 2015. Future publication dates for this statistical bulletin are available to January 2018 (the publication of the December 2017 inflation figures). Publication dates from February 2017 onwards are provisional.

    Details of the policy governing the release of new data are available from our Media Relations Office. Also available is a list of the names of those given pre-release access to the contents of this release.

    In line with the Consumer Price Inflation 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 4 working days ahead of publication. The Governor shared this information with the Monetary Policy Committee (MPC) and officials present at the MPC meeting, on Wednesday 13 January 2016.

    Consumer price inflation for January 2015 to January 2016 will be published on 16 February 2016.

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    Tel: Luke Croydon + 44 (0) 845 6041858
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    Tel: James Tucker +44 (0) 1633 456589
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    Consumer Price Inflation recorded message (available after 9.45am on release day):
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  6. 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: media.relations@ons.gov.uk

    These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

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8 . Methodology