Consumer price inflation, UK: March 2020

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

This is not the latest release. View latest release

19 May 2020 08:51

Error in the Mortgage Interest Payments Series in RPI

A small error has been identified in the interest rate used in producing the mortgage interest payments series in the Retail Prices Index (RPI) for February and March 2020.

We have recalculated the series using the most up-to-date information and can confirm, that due to rounding, the all items RPI is unchanged at 2.5% and 2.6% for the two months respectively. The effect on the mortgage interest payments series would be to raise the published index for February by 2.0 index points (or 0.9%) and lower the March index by 1.3 index points (or 0.6%).

In line with the published revisions policy for consumer price inflation statistics, the index will not be revised. The issue has been corrected when calculating the indices for April 2020. There is no impact on the Consumer Prices Index including owner occupiers’ housing costs (CPIH) or the Consumer Prices Index (CPI).

We apologise for any inconvenience.

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Contact:
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Release date:
22 April 2020

Next release:
20 May 2020

1. Main points

  • The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.5% in March 2020, down from 1.7% in February 2020.

  • The largest contribution to the CPIH 12-month inflation rate in March 2020 came from housing, water, electricity, gas and other fuels (0.51 percentage points).

  • Falls in the price of motor fuels and clothing resulted in the largest downward contributions to the change in the CPIH 12-month inflation rate between February and March 2020.

  • Rises in air fares produced the largest, partially offsetting, upward contribution to change.

  • The Consumer Prices Index (CPI) 12-month rate was 1.5% in March 2020, down from 1.7% in February.

  • The Office for National Statistics (ONS) has released a public statement on the coronavirus (COVID-19) and the production of statistics – Measuring the data describes the situation in relation to consumer price inflation statistics.

  • The consultation period for the UK Statistics Authority’s proposal to address the shortcomings of the RPI, originally scheduled to run until 22 April 2020, has been extended to 21 August 2020 – Glossary includes more details.

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2. CPIH 12-month inflation rate

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.5% in March 2020, down from 1.7% in February.

The CPIH 1-month inflation rate was 0.0% in March 2020, compared with 0.2% in March 2019.

The Consumer Prices Index (CPI) 12-month inflation rate was 1.5% in March 2020, down from 1.7% in February.

Given that the owner occupiers’ housing costs (OOH) component accounts for around 16% of the CPIH, it is the main driver for differences between the CPIH and CPI inflation rates.

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3. Contributions to the CPIH 12-month inflation rate

Figure 2 shows the extent to which the different categories of goods and services have contributed to the overall Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate over the last two years.

The only broad group to make a downward contribution to the CPIH inflation rate in March 2020 was clothing and footwear. Prices in this category fell by 1.2% in the year to March 2020, resulting in the downward contribution of 0.06 percentage points. The contribution from clothing and footwear has varied between positive and negative over the last two years, with the largest downward contribution during this period observed in February 2019.

Since November 2018, the largest upward contribution to the CPIH inflation rate has come from housing and household services. In March 2020, it contributed 0.51 percentage points to the headline rate of 1.5%. Its contribution fell from May 2019 as a result of falling contributions from electricity, gas and other fuels. However, in January 2020, its contribution increased again to 0.55 percentage points and has stayed reasonably close to that level in subsequent months.

Restaurants and hotels provided the second largest contribution to inflation in March 2020. Its contribution of 0.21 percentage points was down slightly from the previous month as a result of falls in the price of accommodation services.

Over the last two years, the contribution from transport has shown more variation than from any other group, ranging from 0.75 in August 2018 to 0.07 in September 2019. Much of the movement comes from changes in the price of motor fuels, though contributions from air fares and second-hand cars have also changed over the period. The contribution from transport was 0.16 percentage points in March 2020 while, within this total, motor fuels made a downward contribution of 0.06 percentage points. Average petrol prices stood at 119.4 pence per litre in March 2020, the lowest observed since February 2019, while average diesel prices were 123.8 pence per litre, the lowest since March 2018.

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4. Contributions to change in the CPIH 12-month inflation rate

Figure 3 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 inflation rate between February and March 2020. The corresponding figures for the Consumer Prices Index (CPI) can be found in column F of Table 26 in the Consumer price inflation tables.

The largest downward contribution (of 0.07 percentage points) to the change in the CPIH 12-month inflation rate came from clothing and footwear, where prices fell by 0.3% between February and March 2020, compared with a rise of 1.0% between the same two months a year ago. Prices usually rise between February and March, and this year’s fall is the first since 2015 and only the second since the start of the constructed CPIH series in 1988. The fall in prices reflects an increase in the proportion of items on sale between February and March 2020, compared with a fall between the same two months a year ago. The effect came from a wide range of women’s, men’s and children’s clothing items.

Sales patterns this year are likely to have been influenced by the coronavirus (COVID-19) pandemic. Although prices were collected around 17 March, before the formal government lockdown was introduced on 23 March, consumer behaviours and retailers’ expectations of that behaviour might have changed as a result of social distancing and other precautions. A number of factors might have contributed to the change, including less browsing in physical stores, people spending more time at home where they might have been less interested in clothing, and a shift in spending patterns towards other necessities such as food and cleaning products.

The downward contribution from transport was also 0.07 percentage points, reflecting a 0.6% fall in prices between February and March 2020, compared with a smaller fall of 0.1% a year ago. The downward effect came almost entirely from motor fuels. Petrol prices fell by 5.1 pence per litre between February and March 2020, compared with a rise of 1.2 pence per litre between the same two months a year ago. This is the largest monthly fall in petrol prices since December 2018. Similarly, diesel prices fell by 5.5 pence per litre between February and March 2020, the largest monthly fall since August 2015. This latest fall compares with a rise of 1.4 pence per litre between February and March 2019.

Prices for motor fuels tend to move broadly in line with global prices for crude oil, but the effect is generally muted as consumer prices for motor fuels also include other costs such as transport, duty and retail costs. Global prices for crude oil have fallen sharply in response to reduced global demand during the COVID-19 pandemic and the failure of the Organization of the Petroleum Exporting Countries (OPEC+) to agree to cut supply in early March 2020. Consumer demand for motor fuels has likely also reduced in light of measures taken to curb the spread of COVID-19, including increased working from home and broader travel restrictions.

Within transport, the downward effect from motor fuels was partially offset by an upward contribution from air fares, which rose by 5.3% on the month in 2020, compared with a fall of 5.7% a year ago. The fares used in compiling the index reflect departures on 17 March with returns one, two or three weeks later depending on the route. At the point of departure, there were reports of some disruption on European routes, but it was only later in the month when large numbers of flights were suspended. Given that it was not clear that return flights would be cancelled or that travellers would have to make alternative arrangements to travel home, all collected prices have been included in the calculation of the index.

Restaurants and hotels provided a downward contribution to change of 0.04 percentage points. Overall, accommodation prices fell by 0.3% between February and March 2020, compared with a 1.2% rise between the same two months a year ago. This downward contribution reverses the rise seen between January and February 2020.

The largest, partially offsetting, upward contribution at broad group level came from alcohol and tobacco. This small effect (of 0.02 percentage points) came from the price of tobacco rising by more than a year ago. Duty rates for tobacco products increased from 11 March 2020 as announced in Budget 2020.

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5. Owner occupiers’ housing costs

Figure 4 shows the contribution of owner occupiers’ housing costs (OOH) and Council Tax to the Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month 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 since early 2018 and made the largest contribution to the CPIH 12-month inflation rate from all the housing and household services categories throughout most of 2019 and into 2020.

Electricity, gas and other fuels made a negative contribution during 2015 and 2016, but subsequent rises, most notably in electricity prices, saw the contribution turn positive through 2017 and into 2018. Further electricity and gas price rises in summer and autumn 2018 increased their contribution to the CPIH 12-month rate. The introduction of the Office of Gas and Electricity Markets’ (Ofgem’s) initial energy price cap resulted in reduced contributions to the CPIH 12-month inflation rate for January to March 2019. However, the contribution increased in April 2019 as energy providers responded to Ofgem’s subsequent raising of the price cap. Ofgem lowered the price cap for the six-month period in effect from 1 October 2019 because of reductions in costs paid by suppliers, mainly wholesale energy costs. This meant that, from October, the contribution to the CPIH 12-month inflation rate from electricity, gas and other fuels became negative. However, from January 2020, it provided an upward contribution as the gas and electricity price reductions in January 2019 unwound.

The increases in Council Tax that started in 2016 have meant that its contribution has risen over recent years, but there was little change in its contribution when the 2019 increases were introduced in April last year. Conversely, the reduction in the contribution from rents between 2016 and 2018 is likely to be a result of a policy to reduce social housing rent. The contribution from rent in total has risen slightly since early 2018. Other housing costs (namely, regular maintenance and repair, along with water and sewerage services) tend to make small contributions to the 12-month inflation rate.

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6. Consumer price inflation data

Consumer price inflation tables
Dataset |Released 22 April 2020
Measures of monthly UK inflation data including the Consumer Prices Index including owner occupiers’ housing costs (CPIH), Consumer Prices Index (CPI) and Retail Prices Index (RPI). These tables complement the consumer price inflation time series dataset.

Consumer price inflation time series
Dataset | Dataset ID: MM23 | Released 22 April 2020
Comprehensive database of time series covering measures of inflation data for the UK including the CPIH, CPI and RPI.

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7. Glossary

Consumer price inflation

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. Consumer price indices, a brief guide gives an overview of the indices and their uses.

12-month inflation rate

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.

Consumer Prices Index including owner occupiers’ housing costs (CPIH)

The CPIH is the most comprehensive measure of inflation. It extends the Consumer Prices Index (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.

Consumer Prices Index (CPI)

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

Retail Prices Index (RPI)

The RPI does not meet the required standard for designation as a National Statistic. In recognition that it continues to be widely used in contracts, we continue to publish the RPI, its subcomponents and RPI excluding mortgage interest payments (RPIX). To view the all-items RPI and 12-month inflation rate, please see the time series section of the inflation and price indices area of our website.

The UK Statistics Authority recommended in 2019 that the publication of the RPI should be stopped at a point in the future and that in the interim, the shortcomings of the RPI should be addressed by introducing CPIH data sources and methods into its production. The Authority and HM Treasury have launched a consultation on the Authority’s proposal to address the shortcomings of the RPI. HM Treasury is consulting on the appropriate timing for the proposed changes to the RPI to take place. The Authority is consulting on how to make its proposed methodological changes to the RPI in a way that follows best statistical practice. The consultation was originally intended to run until 22 April 2020 but, because of the coronavirus (COVID-19) pandemic, the period has been extended to 21 August 2020. The Authority and HM Treasury have agreed that they cannot conclude a meaningful consultation with businesses and individuals focused on mitigating the challenges that this public health and economic emergency has created.

Alongside the consultation on the future of the RPI, we have published proposed updates to our article on the three “use cases” for our consumer inflation measures in Measuring changing prices and costs for consumers and households, proposed updates: March 2020.

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8. Measuring the data

Coronavirus (COVID-19)

In response to the developing coronavirus (COVID-19) pandemic, we are working to ensure that we continue to publish our consumer price statistics. In line with the current government guidelines, we are encouraging Office for National Statistics (ONS) staff to work from home and to avoid unnecessary travel and social contact. We have an established infrastructure and these changes will not impact on our ability to produce our Consumer Prices Index including owner occupiers’ housing costs (CPIH), Consumer Prices Index (CPI) and Retail Prices Index (RPI) statistics.

There will inevitably be challenges around some of our collection activities, as approximately 45% of the CPIH basket is physically collected in stores across 140 locations in the UK. The remainder is collected by ONS staff from online sources and administrative data provided by external suppliers.

The price collection for this publication, reflecting March prices, was largely unaffected by recent developments. However, in a small number of detailed categories, the number of price quotes used in constructing the indices is less than half the number used in February. These sections are identified in relevant tables in the accompanying dataset, for example in table 7.

The collection issues increase in subsequent months and we have been planning for these. Before we release the April figures on 20 May, we will publish an article which will describe both the changes we have made to our data collection procedures and the methodological changes needed to adjust for missing prices where products are not available and services stopped during the lockdown period.

We are engaging with other National Statistics Institutes and international organisations to understand how they are responding to similar issues. The decisions we make around the methods and data sources will be communicated to the Bank of England prior to implementation.

After EU withdrawal

As the UK leaves the EU, it is important that our statistics continue to be of high quality and are internationally comparable. During the transition period, those UK statistics that align with EU practice and rules will continue to do so in the same way as before 31 January 2020.

After the transition period, we will continue to produce our consumer price statistics in line with the UK Statistics Authority’s Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards.

These currently include the standard international Classification of Individual Consumption According to Purpose (COICOP) system, developed by the UN Statistical Division, and for the CPI, the rules underlying the construction of the Harmonised Index of Consumer Prices (HICP), developed by Eurostat in conjunction with EU member states and European Economic Area countries.

Methodology information

The consumer price indices are based on prices collected from outlets around the country, supplemented by information collected centrally over the internet and by phone.

The figures in this publication use data collected on or around 17 March 2020.

Consumer price indices, a brief guide gives an overview of consumer price statistics.

The Consumer Prices Indices Technical Manual covers the concepts and methodologies underpinning the indices in more detail. The latest version was released on 18 September 2019.

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

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Consumer price inflation QMI.

Consumer price inflation, updating weights: 2020 was released on 19 March 2020 and describes the latest update of the relative weights of items in the consumer price inflation basket to ensure they remain representative of current consumer spending patterns. A new source of information for some of the underlying low-level weights was also introduced with the February index. Impact of introducing a new data source for shop-type weights on consumer price indices, released on 12 February 2020, describes the change of source that has been made.

Consumer price inflation basket of goods and services: 2020, released on 16 March 2020, outlines the review process for the items making up the inflation basket used to calculate the UK consumer price inflation indices and the changes in the latest year.

Explaining the contribution to change in the 12-month rate (PDF, 37KB) gives an explanation of 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 depend 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.

Users and uses of consumer price inflation statistics provides information about the users and uses of consumer price inflation statistics and user experiences of these statistics. It also provides information on the characteristics of the different measures of consumer price inflation in relation to potential use.

Use of Retail Price Index Jevons (RPIJ) series

Having reviewed the responses to the consultation on the use made of data on the formula effect in the RPI, we made the decision to cease the publication of these series from the February 2020 consumer price inflation publication (released on 25 March 2020).

The RPI formula effect series (CDID: CRFT, CRFU and CRFV) were published as experimental series and were not the formula effect series, which are published as part of the reconciliation of the CPIH with the RPI and the CPI with the RPI in Table 5 of the consumer price inflation dataset. The series in Table 5 will continue to be published.

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9. Strengths and limitations

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. We have also published proposed updates to the article in Measuring changing prices and costs for consumers and households, proposed updates: March 2020. Specifically, the three cases refer to the Consumer Prices Index including owner occupiers’ housing costs (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.

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Contact details for this Statistical bulletin

Philip Gooding
cpi@ons.gov.uk
Telephone: Consumer Price Inflation enquiries: +44 (0)1633 456900. Consumer Price Inflation recorded message (available after 8.00am on release day): +44 (0)800 0113703