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 October 2013, so the 12-month rate measures changes in prices between October 2012 and October 2013.
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'.
Latest Figure and Long-Term Trend
The CPI 12-month rate (the amount prices change over a year) between October 2012 and October 2013 stood at 2.2%. This means that a basket of goods and services that cost £100.00 in October 2012 would have cost £102.20 in October 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 over half of the 12-month inflation rate each month.
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 September and October 2013 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 diagrammatic explanation of the calculation.
The CPI rose by 0.1% between September and October 2013, compared with a rise of 0.5% between the same two months in 2012. The 1-month movement was therefore 0.4 percentage points lower this year compared with this year. This led to the CPI 12-month rate falling from 2.7% in September to 2.2% in October (the difference being due to rounding).
The largest downward contributions to the change in the CPI 12-month rate between September and October came from:
Transport (-0.21pp): prices, overall, fell by 1.5% between September and October 2013 compared with a smaller fall of 0.1% between the same two months in 2012. Within the transport sector, the main downward contribution came from prices for motor fuels with reports of price cuts at many of the major supermarket chains on the back of decreases in wholesale prices. Petrol prices fell by 4.9 pence per litre between September and October this year compared with a fall of 0.9 pence per litre between the same two months a year ago, to stand at 131.6 pence. Diesel prices fell by 2.9 pence per litre between September and October this year compared with a fall of 0.6 pence per litre between the same two months a year ago, to stand at 139.0 pence. There were also notable downward contributions from air fares and prices for second hand cars.
Education (-0.18pp): prices, overall, rose by 8.2% between September and October 2013, compared with a rise of 19.1% between the same two months in 2012. The downward contribution came principally from UK and EU student tuition fees, where the impact on the CPI of the rise in the cap for tuition fees introduced last year for new UK and EU students in England was smaller this year than in 2012. The smaller impact was due to the fact that many students were already paying the higher rate of fees. In addition there were more modest price increases for part-time and postgraduate fees compared to last year.
There were no notable upward contributions to the change in the CPI 12-month rate between September and October 2013.
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 new 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 and 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 12% of the expenditure weight of CPIH. This has increased gradually 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.
ONS currently classifies CPIH as an experimental statistic. On 25 July 2013 the UK Statistics Authority published its assessment of consumer price statistics (Statistics on Consumer Price Inflation). The Authority determined that CPIH could be designated as a National Statistic subject to ONS implementing a number of enhancements by the end of 2013. ONS will remove the experimental statistics classification from CPIH once these enhancements have been made. For further information on CPIH please see Introducing the new CPIH measure of Consumer Price Inflation, 2005 to 2012.
In October 2013, the 12-month rate (the rate at which prices increased between October 2012 and October 2013) for CPIH stood at 2.0%, down from 2.5% in September.
The difference between the CPI and CPIH annual rates in October 2013 was 0.2 percentage points, the same as the difference in September. Owner occupiers’ housing costs rose by 0.1% between September and October 2013, and also by 0.1% between September and October 2012. 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 Index1 (UK, 2005 = 100)||OOH Index1 (UK, 2005 = 100)||CPIH 1-month1 rate||OOH 1-month1 rate||CPIH 12-month1 rate||OOH 12-month1 rate|
CPIH and OOH are currently designated as experimental statistics by ONS.
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 and 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.
ONS currently classifies RPIJ as an experimental statistic. On 25 July 2013 the UK Statistics Authority published its assessment of consumer price statistics (Statistics on Consumer Price Inflation). The Authority determined that RPIJ could be designated as a National Statistic subject to ONS implementing a number of enhancements by the end of 2013. ONS will remove the experimental statistics classification from RPIJ once these enhancements have been made. For further information on RPIJ please see Introducing the new RPIJ measure of Consumer Price Inflation, 1997 to 2012.
In October 2013, the 12-month rate (the rate at which prices increased between October 2012 and October 2013) for RPIJ stood at 1.9%, down from 2.5% in September. This fall in the RPIJ 12-month rate was comparable with the falls seen for the other main consumer price inflation measures and bucks the trend of comparatively stable growth in RPIJ inflation witnessed since early 2013. RPIJ and CPIH have tracked each other closely over the last two years.
The RPI 12-month rate for October stood at 2.6%, 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 38.0% over this period, compared with 31.5% as measured by the RPIJ. The use of the Carli formula has therefore added 6.5 percentage points to the change in prices over the last ten 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 1 (UK, 1987 = 100)||RPI 12-month1 rate||RPIJ 12-month1 rate||RPI 1-month1 rate||RPIJ 1-month1 rate|
The RPI has been de-designated as a National Statistic and RPIJ is currently designated as an experimental statistic by ONS.
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 October 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, D||H, D||H, T, D||T, D|
|CPIH1||H, T, D||H||H, T, D||T, D|
|RPIJ1||H, T||H||H, T||T|
|RPI2||H, T||H, D||H, T, D||T, D|
|RPI Pensioner Indices2||:||:||H, T||T|
|International Comparisons||:||:||H, T||T|
These statistics are currently designated as experimental statistics by ONS.
These statistics are not National Statistics.
H = Latest headline figures, D = Detailed data (including disaggregations), T = Time series data.
On 29 October 2013, ONS published its updated Work Programme for Consumer Price Statistics. The plan provides an update on the work programme for consumer price statistics, including key priorities and other projects which form part of the ongoing development of the statistics.
Understanding and accessing the data
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.
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 available from the guidance and methodology section of the ONS website.
Further information on consumer price inflation statistics, including details of the methodology used to construct the indices, articles, historic data etc, is available on the Consumer Price Indices Taxonomy page.
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 (1.24 Mb Excel sheet) are provided via an 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. Previously the data published covered January 1996 to March 2013. The data for April to June 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 November CPI is published on 17 December 2013, at which point the detailed data published will be extended to September 2013.
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 October 2013 for EU Member States, together with an EU average, on 15 November 2013. A summary of the latest European data is available from Eurostat’s database tables. Further information on HICP for the European Union, Eurozone 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 2013 basket are described in an article Consumer Prices Index and Retail Prices Index: the 2013 Basket of Goods and Services (354.4 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.
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.
Detailed explanations of the main uses and methodology used to construct the RPI and how it differs from the CPI can be found in Chapter 9 of the Consumer Price Indices Technical Manual. More information on CPIH (Introducing the new CPIH measure of Consumer Price Inflation, 2005 to 2012) and RPIJ (Introducing the new RPIJ measure of Consumer Price Inflation, 1997 to 2012) can be found in the articles linked.
Information on those measures will be added to the Technical Manual in the next update which is due to be published before the end of 2013. '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 October 2013 data, collected on 8 October 2013. 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.
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 3.5 working days ahead of publication. Therefore the Governor shared this information with the MPC, and officials present at the MPC meeting, on Thursday 7 November 2013.
Consumer price inflation for November 2012 to November 2013 will be published on 17 December 2013.
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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|