1. Main points

  • The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.5% in February 2018, down from 2.7% in January 2018.

  • The largest downward contributions to the change in the rate came from transport and food prices, which rose by less than a year ago.

  • Falling prices for accommodation services also had a downward effect.

  • Rising prices for footwear produced the largest, partially offsetting, upward contribution.

  • The Consumer Prices Index (CPI) 12-month rate was 2.7% in February 2018, down from 3.0% in January 2018.

  • From April 2018, publication of these figures will move from Tuesday to Wednesday; the new release dates are available.

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2. Things you need to know about this release

On 15 June 2017 the National Statistician announced that routine pre-release access to Office for National Statistics (ONS) statistics would end from 1 July 2017. Following this, we have considered the dates of our publications to ensure that they continue to meet user needs. From April 2018, the prices theme day – which encompasses consumer prices, business prices and house prices – will move from a Tuesday to a Wednesday. Alongside this, the labour market theme day will move from a Wednesday to a Tuesday. The new release dates and further explanation of the reasons for these changes are available in a separate article.

The Bank of England were granted exceptional pre-release access to an estimate of the Consumer Prices Index (CPI) at 1:30pm on Thursday 15 March 2018 so that the data were available for the Monetary Policy Committee meeting held on that day. Correspondence with the Bank of England is available.

Consumer price inflation, updating weights: 2018 was released on 19 March 2018 and describes the latest update of weights of items in the consumer price inflation basket to ensure they remain representative of current consumer spending patterns. Consumer price inflation basket of goods and services: 2018, describing the changes to the basket of goods and services for 2018, was released on 13 March 2018.

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 (HCIs, currently under development with preliminary estimates published for the first time on 19 December 2017) 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 dataset.

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 dataset provide more detailed information.

The figures in this publication use data collected on or around 13 February 2018.

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3. CPIH 12-month rate lowest since March 2017

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month rate was 2.5% in February 2018, down from 2.7% in January 2018. Following a steady increase from late 2015, the CPIH levelled off, ranging between 2.6% and 2.8% from April 2017 to January 2018. The figure for February 2018 is a little below this range and is the lowest observed since March 2017.

Figure 1 compares the 12-month inflation rates for CPIH and 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. Inflation rate for communication lowest since 2009

Figure 2 shows that price movements for all the broad categories of goods and services except communication had an upward effect on the Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month rate in February 2018. Communication had a small downward effect on the rate, with prices falling by 0.3% in the year to February 2018, the lowest 12-month rate since March 2009. Conversely, the rate for alcohol and tobacco, at 5.7%, was the highest since December 2013.

The largest upward contribution to the CPIH 12-month rate continues to come from housing and household services, albeit less than was observed during the spring and summer months of 2017.

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. In particular, 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 and in particular, motor fuels. However, during the first two months of 2018, the contributions from both of these categories have fallen back.

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5. Motor fuels made the largest downward contribution to change in the CPIH rate between January and February 2018

Figure 4 shows how each of the main groups of goods and services contributed to the change in the Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month rate between January and February 2018. 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 downward contribution to the change in the CPIH rate came from transport, particularly motor fuels and sea fares. Average petrol prices fell by 0.2 pence per litre between January and February this year to stand at 120.8 pence per litre in February. This compares with a rise of 1.6 pence between the same two months a year ago to reach 120.2 pence per litre in February 2017. Sea fares rose by 2.9% between January and February this year compared with a larger rise of 13.2% a year ago. The sharper rise in 2017 may have been influenced by the pricing date for outward journeys falling on Valentine’s Day.

Restaurants and hotels also had a large downward effect on the change in the rate, with prices of overnight hotel accommodation falling this year but rising a year ago. These prices can be reasonably volatile but again, the rise in 2017 may have been influenced by the timing of Valentine’s Day.

There was a large downward contribution from food and non-alcoholic beverages, where prices rose by 0.1% between January and February this year compared with a rise of 0.8% a year ago. The downward effect was widespread within the broad group, with the largest single contribution coming from vegetables where prices fell in 2018 compared with a rise in 2017. The rise between January and February 2017 came amidst reports of shortages of certain greens and salad vegetables arising from adverse weather in southern Europe.

A slightly smaller downward effect came from recreation and culture. Within this group, the downward contributions came from a range of recreational goods and services, particularly audio-visual equipment.

The largest, partially offsetting, upward effect came from clothing and footwear. Prices rose as usual in February following the January sales period but they rose by more in 2018 than 2017. This effect came from footwear, particularly women’s footwear.

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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: 2018 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: 2018 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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