1. Main points

  • The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.3% in June 2018, unchanged from May 2018.

  • Rising prices for motor fuels and domestic gas and electricity produced the largest upward contributions to change in the rate between May and June 2018.

  • Falling prices for clothing and games, toys and hobbies provided the largest downward effects.

  • The Consumer Prices Index (CPI) 12-month rate was 2.4% in June 2018, unchanged from May 2018.

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2. Things you need to know about this release

As of 18 April 2018, the prices theme day – which encompasses consumer prices, business prices and house prices – has moved from a Tuesday to a Wednesday. Future release dates and further explanation of the reasons for these changes are available in a separate article.

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.

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 12 June 2018.

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3. CPIH 12-month rate unchanged in June 2018

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month rate was 2.3% in June 2018, unchanged from May 2018. The rate had fallen steadily from a recent high of 2.8% in autumn 2017 to 2.3% in March 2018. It has since fluctuated between 2.2% and 2.3%, in part due to the timing of Easter.

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. Largest upward contribution to the CPIH inflation rate from transport

Figure 2 shows that price movements for most of the broad categories of goods and services had an upward effect on the Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month rate in June 2018. The exception was miscellaneous goods and services, which had a small downward pull on the rate, with prices falling by 0.2% in the year to June 2018.

The largest upward contribution to the CPIH 12-month rate came from transport, where prices rose by 5.3% in the year to June 2018 leading to a contribution of 0.67 percentage points to the CPIH 12-month rate. The June 2018 rate for transport is the highest since April 2017 when it was 6.2%. The largest contribution within the transport group came from motor fuels, where prices rose by 11.6% in the year to June. Housing and household services continues to make a large upward contribution (of 0.53 percentage points in June 2018). This comes from a combination of owner occupiers’ housing costs, domestic utilities and Council Tax.

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, particularly motor fuels.

During 2018, the contributions from most of the categories have fallen back, leading to a fall in the 12-month rate. This was true of transport between January and April. However, its contribution has more than doubled between April and June, rising from 0.30 percentage points in April to 0.67 percentage points in June.

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5. Transport contributes most to change in the rate between May and June 2018

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 May and June 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 upward contribution to change in the CPIH rate came from transport, principally from motor fuels. Petrol prices rose by 2.7 pence per litre between May and June 2018 to stand at 128.0 pence per litre in June, the highest average price since September 2014. This compares with a 1.1 pence per litre fall between the same two months of 2017 to stand at 115.3 pence per litre in June 2017. Similarly, diesel prices rose by 2.9 pence per litre between May and June 2018 compared with a 1.4 pence per litre fall between the same two months a year ago. Within the broad transport group, the upward effect from motor fuels was partially offset by a small downward contribution from air fares, which rose between May and June this year by less than between the same two months a year ago.

Housing and household services also had a large upward effect, with domestic gas and electricity prices rising between May and June this year compared with no change between the same two months a year ago.

The largest, partially offsetting, downward effect came from clothing and footwear, where prices of clothing fell by 2.3% between May and June this year compared with a fall of 1.1% between the same two months a year ago. Prices usually fall between May and June as the summer sales season begins, but the fall in 2018 is the largest since 2012. The effect came mainly from men’s clothing.

There was also a large downward effect from the recreation and culture category, where prices, overall, fell by 0.4% between May and June this year compared with a smaller fall of 0.1% between the same two months a year ago. The main effect came from games, toys and hobbies, where prices fell this year by more than a year ago, particularly for computer games. Prices for these games are heavily dependent on the composition of bestseller charts, often resulting in large overall price changes from month to month.

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6. Owner occupiers’ housing costs’ contribution to the CPIH 12-month rate has eased since October 2016

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. OOH has consistently been the largest contributor to the rate during the period from 2015 to date, though it has fallen back from a high in October 2016. The contribution from other components has varied.

Utility bills made a negative contribution during 2015 and 2016 but more recent rises, most notably in electricity prices, have seen its contribution turn positive through 2017 into 2018. Increases in Council Tax starting in 2016 mean that its contribution has also increased over this period.

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, whilst other housing costs (namely regular maintenance and repair, along with water and sewerage services) tend to make a very small contribution 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: 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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