Consumer price inflation, UK: April 2019

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

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24 May 2019

RPI April 2019: Statement

An error has been identified in the component price data used in the calculation of the April 2019 Retail Prices Index (RPI).

Incorrect price data for petrol and diesel were used in the compilation process. A price of 122.75 pence per litre (PPL) for petrol and 132.08 PPL for diesel were used. The correct values should have been 124.06 PPL for petrol and 132.96 PPL for diesel.

The published RPI annual growth rate for April 2019 was 3.0% (3.04% to two decimal places). If the April 2019 RPI was recalculated using the correct fuel prices, it would increase the RPI annual growth rate by 0.03 percentage points, resulting in a headline rate of 3.1% (3.07% to two decimal places).

In line with the published revisions policy for consumer price inflation statistics, this error will not be corrected in the published RPI series.

There is no impact on the Consumer Prices Index including owner occupiers’ housing costs (CPIH) or the Consumer Prices Index. A full review of the price compilation procedure for fuel prices in RPI will take place to ensure this error will not occur again.

This is an accredited national statistic.

Contact:
Email Andy King

Release date:
22 May 2019

Next release:
19 June 2019

1. Main points

  • The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.0% in April 2019, up from 1.8% in March 2019.

  • Rising energy prices and air fares, which were influenced by the timing of Easter, produced the largest upward contributions to change in the rate between March and April 2019.

  • The largest, offsetting, downward contribution came from across a range of recreational and cultural items, which included computer games and package holidays.

  • The Consumer Prices Index (CPI) 12-month rate was 2.1% in April 2019, up from 1.9% in March 2019.

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2. Things you need to know about this release

From next month, we are going to redevelop the current UK consumer price inflation bulletin with a new structure based on user research, which will concentrate on the inflation measure and the items contributing to any changes. Further details are available on request from the Consumer Prices Inflation Production Teams, Office for National Statistics (Telephone: +44 (0)1633 456900 Email: cpi@ons.gov.uk).

Linked to this development we continue to ask for your views on how we can shape the future of the Consumer price inflation detailed briefing note. We would be extremely grateful if you could please complete the following anonymous survey. Your answers to this survey – which should take less than five minutes to complete – would be invaluable. The survey will close at the end of May.

The National Statistics status of the Consumer Prices Index including owner occupiers’ housing costs (CPIH) was reinstated on 31 July 2017. A letter from the Director General for Regulation to the National Statistician detailed the actions that were taken to meet the requirements as set out in the CPIH assessment report.

We have illustrated our future approach to measuring changing prices and costs faced by consumers and households using three “use cases”, along with how they relate to the measures that we currently publish and those that are under development. Specifically, they refer to the CPIH as our lead measure of inflation based on economic principles; the Household Costs Indices as a set of measures to reflect the change in costs as experienced by households; and the Retail Prices Index (RPI) as a legacy measure that is required to meet existing user needs. Shortcomings of the Retail Prices Index as a measure of inflation, released on 8 March 2018, describes the issues with the RPI.

Consumer price inflation is the rate at which the prices of goods and services bought by households rise or fall. It is estimated by using price indices. One way to understand this is to think of a shopping basket containing all the goods and services bought by households. Movements in price indices represent the changing cost of this basket. Consumer price indices – a brief guide gives an overview of the indices and their uses.

The most common approach to measuring inflation is the 12-month inflation rate, which compares prices for the latest month with the same month a year ago. In any given month, the 12-month rate is determined by the balance between upward and downward price movements of the range of goods and services included in the index.

This release also examines how the various types of goods and services contribute to the change in the 12-month inflation rate between the latest two months. The size and direction of these contributions depends on how prices changed between both the latest two months this year and the same two months last year. For example, the price of a product could make an upward contribution to the change in the rate even if it fell, provided that it fell by less than it did between the same two months a year ago. Explaining the contribution to change in the 12-month rate (2013) covers this concept in more detail.

The CPIH is the most comprehensive measure of inflation. It extends the CPI to include a measure of the costs associated with owning, maintaining and living in one’s own home, known as owner occupiers’ housing costs (OOH), along with Council Tax. Both of these are significant expenses for many households and are not included in the CPI.

Aside from including OOH and Council Tax, CPIH is otherwise identical to CPI. This means that, aside from these two components, the factors contributing to the CPI rate are the same as those contributing to the CPIH. For example, if food is reported as increasing the CPIH rate, it is also acting to increase the CPI rate. The size of the contributions for components other than OOH and Council Tax are exaggerated in the CPI compared with the CPIH because they account for a larger proportion of the overall index.

The CPI is produced at the same level of detail as CPIH, in the accompanying dataset and time series.

The Retail Prices Index (RPI) does not meet the required standard for designation as National Statistics. In recognition that it continues to be widely used in contracts, we continue to publish the RPI, its sub-components and RPIX. To view the all-items RPI and 12-month inflation rate and an at-a-glance comparison with other measures, please see the time series section of the inflation and price indices area of our website. The accompanying dataset and time series provide more detailed information.

The figures in this publication use data collected on or around 16 April 2019.

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3. CPIH 12-month inflation rate rise

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.0% in April 2019, up from 1.8% in March 2019.

Figure 1 compares the 12-month inflation rates for CPIH and the Consumer Prices Index (CPI), along with the rate for the owner occupiers’ housing costs (OOH) component of CPIH. Given that OOH accounts for around 17% of CPIH, it is the main driver for differences between the CPIH and CPI inflation rates.

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4. Clothing and footwear continues to have a downward contribution to inflation

Figure 2 shows that price movements for most of the broad categories of goods and services made an upward contribution to the Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month rate in April 2019. The exception was clothing and footwear, which had a small downward contribution, with prices falling by 1.8% in the year to April 2019. This category has had a downward contribution on the 12-month rate in each month starting from September 2018.

The largest upward contribution to the CPIH 12-month rate in April 2019 came from housing and household services, with prices rising by 2.3% on the year. Within this broad group (which overall contributed 0.68 percentage points), the largest contributions were from electricity, gas and other fuels (which contributed 0.28 percentage points to the CPIH 12-month rate), owner occupiers’ housing costs (a 0.20 percentage point contribution), and Council Tax and rates (a 0.12 percentage point contribution).

The second-largest upward contribution came from transport, where prices rose by 4.6% on the year. Within transport, the most notable upward contributions came from air fares, fuels and lubricants, and new cars. Seasonal price rises between March and April 2019 have increased the contribution from air fares, where they had little contribution following price falls before Christmas.

Figure 3 shows the extent to which the different categories of goods and services have contributed to the overall CPIH 12-month rate over the last two years. Transport, and food and non-alcoholic beverages prices have been important factors in driving the changes in the rate. As the overall CPIH rate began to level off from April 2017, the contribution from food and non-alcoholic beverages continued to increase, being offset by a fall in the contribution from transport, particularly motor fuels.

The contributions from most of the categories began to fall back in the early months of 2018, leading to a fall in the CPIH 12-month rate. Until December 2018, there was a period of relative stability in the headline rate as changes to the contribution of divisions largely offset each other. The contribution from clothing and footwear has broadly continued to decline while the contribution from transport has fluctuated, rising between April and August 2018 then gradually falling back until successive rises in March and April this year. Conversely, the contribution from food and non-alcoholic beverages broadly fell to November 2018 but has since risen slightly until small falls in March and April 2019.

In January 2019, falling gas and electricity prices reduced the contribution from housing and household services, and the overall CPIH 12-month rate. However, energy prices rose in April 2019 increasing inflation above 2% for the first time in 2019.

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5. Upward change to CPIH 12-month rate from rising energy prices

Figure 4 shows how each of the main groups of goods and services contributed to change in the Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month rate between March and April 2019. The corresponding figures for the Consumer Prices Index (CPI) can be found in column F of Table 26 in the Consumer price inflation dataset.

The largest upward contribution to the change in the CPIH 12-month rate came from housing and household services (which overall contributed 0.25 percentage points), where electricity and gas prices rose, between March and April 2019, by 10.9% and 9.3%, respectively. The upward movement partially reflected the response from energy providers to Ofgem’s six-month energy price cap, which came into effect from 1 April 2019. On 1 January 2019, the introduction of price cap tariffs saw prices for electricity and gas fall by 4.9% and 8.5%, respectively, which resulted in a downward contribution to the change in the January CPIH 12-month rate of 0.17 percentage points.

Transport, principally air fares, also had a large upward contribution to the change in the CPIH rate. The timing of Easter, falling towards the end of April 2019, contributed to air fares rising by 26.4% on the month, with prices for some outgoing and return flights being collected within the school holiday period. There were also small upward contributions from international rail, coach and sea fares. Last year, Easter fell at the beginning of April, before the price collection period, meaning air fares fell slightly, by 0.2%, between March and April 2018.

Within the transport category, there was a small upward movement for motor fuels. Petrol prices rose by 3.8 pence per litre between March and April 2019 to stand at 124.1 pence per litre. This compares with a 1.5 pence per litre rise between the same two months a year ago. Similarly, diesel prices rose by 2.3 pence per litre between March and April this year compared with a rise of 1.6 pence per litre a year ago. There were small, offsetting downward contributions from second-hand cars, where prices fell by more than a year ago, and from Vehicle Excise Duty (or vehicle tax). The rate of vehicle tax increased this year but by less than a year ago when the new VED bands were introduced for cars in their second tax year.

There were further small upward effects from miscellaneous goods and services, where prices for car insurance and other personal effects rose this year but fell a year ago, and from the communications division, where mobile phone charges and the cost of bundled telecommunications services rose by more than a year ago.

The largest downward contribution to the change in the CPIH 12-month rate came from recreation and culture, where prices fell by 0.8% between March and April 2019, compared with a rise of 0.4% between the same two months of 2018. Within this group, the largest downward effect came from games, toys and hobbies, particularly computer games. Price movements for these items can often be relatively large depending on the composition of bestseller charts. There was also a large downward movement from audio-visual equipment and related products, where overall prices fell by 2.8% this year compared with a fall of 0.2% a year ago.

There was also a large downward contribution from alcoholic beverages and tobacco, in particular, from cigarettes. Prices for cigarettes overall fell by 0.6% between March and April 2019 compared with a rise of 1.4% between the same two months a year ago. Prices for beer, particularly larger packs of canned lager, also had a small downward contribution, although this was partially offset by spirits, which rose in price between March and April 2019 by more than a year ago.

The timing of Easter also contributed to small downward effects from accommodation services, within the wider restaurants and hotels division. The price of overnight hotel stays rose by less than a year ago.

Finally, there was a small downward contribution from furniture, household equipment and maintenance, where prices overall fell by 1.2% between March and April 2019 compared with a fall of 0.8% between the same two months a year ago.

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6. Rising energy prices make largest contribution to CPIH 12-month rate from housing and household services

Figure 5 shows the contribution of owner occupiers’ housing costs (OOH) and Council Tax to the Consumer Prices Index including owner occupiers’ housing costs (CPIH) inflation rate in the context of wider housing-related costs. The contribution from OOH had been on a downward trend from a high in October 2016. However, it has stabilised over the latest 12 months and has made the largest contribution to the CPIH 12-month rate of all the housing and household services categories, for the first three months of 2019.

Utility bills made a negative contribution during 2015 and 2016 but subsequent rises, most notably in electricity prices, saw the contribution turn positive through 2017 into 2018. Further electricity and gas price rises in autumn 2018 increased their contribution to the CPIH 12-month rate. The introduction of Ofgem’s initial energy price cap resulted in reduced contributions to the CPIH 12-month rate for January to March 2019. However, this month saw the contribution from electricity, gas and other fuels increase to 0.28 percentage points as energy providers responded to the latest price cap.

Increases in Council Tax starting in 2016 mean that its contribution has increased over recent years. Conversely, the reduction in the contribution from rents is likely to be a result of a policy to reduce social housing rent starting from April 2016, although the contribution has risen slightly over the last year. Other housing costs (namely regular maintenance and repair, along with water and sewerage services) tend to make small contributions to the 12-month rate.

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8. Quality and methodology

The Consumer Price Inflation Quality and Methodology Information report contains important information on:

  • the strengths and limitations of the data and how it compares with related data

  • users and uses of the data

  • how the output was created

  • the quality of the output including the accuracy of the data

The Consumer Price Indices Technical Manual covers the concepts and methodologies underpinning the indices in more detail.

The CPIH Compendium provides a comprehensive source of information on the Consumer Prices Index including owner occupiers’ housing costs (CPIH), with a focus on the approach to measuring owner occupiers’ housing costs (OOH).

The Consumer price inflation basket of goods and services: 2019 article details the annual review process for the items making up the inflation basket used to calculate the UK consumer price inflation indices and describes the changes in the latest year.

Consumer price inflation, updating weights: 2019 describes the latest changes to the relative weights of items in the inflation basket to ensure they remain representative of current consumer spending patterns.

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