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 May 2014, so the 12-month rate measures changes in prices between May 2013 and May 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 May 2013 and May 2014 stood at 1.5%. This means that a basket of goods and services that cost £100.00 in May 2013 would have cost £101.50 in May 2014. The latest information continues the trend of below 2.0% inflation during 2014. With the exception of the April figure, which is likely to have been influenced by the position of Easter, the rate of inflation has fallen each month since Autumn 2013.
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 almost half of the 12-month inflation rate each month.
The 12-month inflation rate for food & non-alcoholic beverages is currently at its lowest level for over nine years with prices falling by 0.6%. This is the first price fall on the year since March 2006. However, since March 2006, prices for these goods have increased more than half as much again as the all items CPI (42% compared with 27%).
Figure A below shows the CPI 12-month rate over the last 10 years. Table A below shows the CPI 1-month rate (the amount prices change between two 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).
|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 April and May 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 fell by 0.1% between April and May 2014, compared with a rise of 0.2% between the same two months in 2013. The 1-month movement was therefore 0.3 percentage points lower this year compared with last year. This led to the CPI 12-month rate falling from 1.8% in April to 1.5% in May.
The largest downward contributions to the change in the CPI 12-month rate between April and May 2014 came from:
transport: prices, overall, fell by 0.7% between April and May 2014, compared with a rise of 0.4% between the same two months a year earlier. The largest contribution to the fall came from air transport, with average fares falling by 3.2% on the month compared with a rise of 22.0% on the month a year ago. The timing of Easter is likely to be a factor in the different movements, with the Easter weekend falling within the April collection period for these services this year, but missing the April collection period a year ago. There was also a smaller downward effect from sea transport. Again, the position of Easter is a likely factor. Partially offsetting these movements was a large upward contribution from motor fuels with prices, overall, rising this year but falling a year ago. Petrol prices rose by 0.4 pence per litre between April and May this year (to stand at around £1.29 per litre) compared with a fall of 3.1 pence per litre between the same two months a year ago. Diesel prices rose by 0.3 pence per litre this year compared with a fall of 3.2 pence per litre in 2013.
food & non-alcoholic beverages: prices, overall, fell between April and May this year but were little changed between the same two months a year ago. The downward effect came from a variety of product categories, most notably bread & cereals, meat, vegetables and soft drinks.
clothing & footwear: prices, overall, fell by 0.1% between April and May this year but rose by 1.2% a year ago. The main downward effect came from garments, particularly women’s outerwear where prices for some items fell this year but rose a year ago. This came amidst reports of May 2013 temperatures falling below seasonal norms.
The largest upward contributions to the change in the CPI 12-month rate between April and May 2014 came from:
recreation & culture: prices, overall, rose by 0.4% between April and May 2014 compared with a fall of 0.3% between the same two months a year earlier. The upward contribution came principally from games, toys & hobbies, in particular from computer games. There was a smaller upward effect from recording media and a small, partially offsetting downward effect from books, newspapers & stationery.
alcohol & tobacco: prices, overall, rose by more than a year ago. The largest effect came from wine where New World wines recovered in price following sales across a number of major retailers in April this year.
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 would make the index 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 May 2014, the 12-month rate (the rate at which prices increased between May 2013 and May 2014) for CPIH stood at 1.4%, down from 1.6% in April.
The difference between the CPI and CPIH 12-month rates in May 2014 was 0.1 percentage points, down from a difference of 0.2 percentage points in April. The difference in the change in the annual rates was due to rounding plus the different weights in the two measures caused by the inclusion of owner occupiers’ housing costs in CPIH. The different weights resulted in marginally smaller downward contributions to the change in the CPIH 12-month rate across a couple of categories.
Owner occupiers’ housing costs increased by 0.1% between April and May 2014, the same as between these months a year earlier. This meant it had a negligible impact on the change in the 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 May 2014, the 12-month rate for RPIJ stood at 1.7%, down from 1.8% in April. CPIH and RPIJ broadly continue to track each other as they have done for the last two years.
The RPI 12-month rate for May 2014 stood at 2.4%, 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 but the difference has increased to an average of 0.7 percentage points over the last 3 years. Cumulatively, inflation as measured by the RPI is 37.2% over the 10 year period, compared with 30.5% 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 May 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|
|RPI1||H, T||H, D||H, T, D||T, D|
|RPI Pensioner Indices1||:||:||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.
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 (1.47 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 December 2013. The data for January to March 2014 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 August CPI is published on 16 September 2014, at which point the detailed data published will be extended to June 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 May 2014 for EU Member States, together with an EU average, on 16 June 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 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 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 2014 are available from the National Statistics website in an article published on 25 April 2014 entitled Consumer Price Inflation Statistics - Updating Weights for 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 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.
This bulletin includes the May 2014 data, collected on 13 May 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 June 2013 to June 2014 will be published on 15 July 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|