Consumer price inflation, UK: September 2021

• The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 2.9% in the 12 months to September 2021, down from 3.0% in the 12 months to August.

• The largest upward contribution to the September 2021 CPIH 12-month inflation rate came from transport (0.91 percentage points) with further large upward contributions from housing and household services (0.69 percentage points), restaurants and hotels (0.34 percentage points), and recreation and culture (0.31 percentage points).

• CPIH increased by 0.3% on the month in September 2021, compared with a rise of 0.4% in September 2020.

• Restaurants and hotels made the largest downward contribution to the change in the CPIH 12-month inflation rate between August and September 2021, with partially offsetting upward contributions from most other divisions, notably transport, furniture and household goods, food and non-alcoholic beverages, and housing and household services.

• The large downward contribution to change from restaurants and hotels is a base effect, in part because of the recovery of restaurant and cafe prices in September 2020 following August’s Eat Out to Help Out scheme.

• The Consumer Prices Index (CPI) rose by 3.1% in the 12 months to September 2021, down from 3.2% in August.

• On a monthly basis, CPI increased 0.3% in September 2021, compared with a rise of 0.4% in September 2020.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 2.9% in the 12 months to September 2021, down from 3.0% to August. Annual inflation rates at this time are influenced by the effects of the coronavirus (COVID-19) lockdowns in 2020. The Office for National Statistics’ (ONS) blog Beware Base Effects describes how relatively low prices for some items during and after that period influence current inflation rates. In particular, in August 2020, many prices in restaurants and cafes were discounted because of the government’s Eat Out to Help Out (EOHO) scheme, which offered customers half price food and drink to eat or drink in (up to the value of £10) between Mondays and Wednesdays. Part of the easing in the September 2021 12 month inflation rate is because of price increases last year following the end of this temporary scheme.

The Consumer Prices Index (CPI) rose by 3.1% in the 12 months to September 2021, down from 3.2% to August.

On a monthly basis, CPIH rose by 0.3% in September 2021, compared with a rise of 0.4% in the same month a year ago. Price rises in clothing and footwear, housing and household services, recreation and culture, and furniture and household goods contributed to the monthly rate, with a partially offsetting downward contribution from transport. More information on contributions to change is provided in Section 4.

In September 2021 the CPI rose by 0.3% from the previous month, compared with a rise of 0.4% in the same month the previous year.

Given that the owner occupiers’ housing costs (OOH) component accounts for around 19% of the CPIH, it is the main driver for differences between the CPIH and CPI inflation rates.

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.

Transport

The contribution from transport has shown more variation than any other group over the last two years. It has ranged from a downward contribution of 0.20 percentage points in May 2020 during the first coronavirus (COVID-19) lockdown to an upward contribution of 0.91 percentage points in September 2021. This is the largest upward contribution from any division this month. It was last equal in November 2011, and was last higher in October 2011, when it stood at 0.98 percentage points.

Within transport, the movements have mainly been caused by changes in the price of motor fuels. Motor fuels made a downward contribution to the 12-month rate between March 2020 and February 2021, before the contribution turned positive in March 2021 and subsequently increased to 0.41 percentage points in June 2021. Since July it has eased, with a contribution of 0.37 percentage points in September.

Average petrol prices stood at 134.9 pence per litre in September 2021, compared with 113.3 pence per litre a year earlier. The September 2021 price is the highest recorded since September 2013. In comparison, for most of September 2020, some areas of the UK were in a period of relaxed movement restrictions, and petrol prices were therefore recovering after a period of reduced demand. September 2021 also saw the introduction of the new E10 petrol grade as standard. The new grade is compatible with most cars, including all cars built since 2011, and has the advantage of reducing carbon emissions. Because there is little direct benefit or detriment to the consumer, a quality adjustment was not necessary. There is no evidence to suggest that the new petrol grade has affected the price. The large queues seen at petrol stations at the end of September this year fell outside of the price collection window for CPIH and are not reflected in these figures.

The contribution from second-hand cars has also changed significantly since the beginning of 2020, rising from a downward effect of 0.07 percentage points in January 2020 to an upward pull of 0.15 percentage points in October. With the onset of the coronavirus pandemic, there were reports of increased demand as people sought alternatives to public transport. From October 2020, the contribution to the 12-month rate gradually fell back to 0.01 percentage points in April 2021 before rising again to 0.23 percentage points in September 2021, the largest contribution from second-hand cars since February 2010. Used car prices increased 2.9% on the month to September 2021, leading to a cumulative increase of 21.8% since April 2021. By comparison, in 2020, used car prices grew 2.1% on the month to September, and by 2.4% between April and September. It should also be noted, however, that April 2021 prices were lower than in April 2020, relative to January (Figure 3).

These latest movements come amid reports of increased demand as dealers opened following the latest national lockdown, together with a global semiconductor shortage affecting the production of new cars (which itself contributed 0.06 percentage points to the annual rate) and resulting in consumers turning to the used car market. Additionally, there are reportedly concerns in the trade about the supply of second-hand cars because of a variety of factors. These include fewer one-year-old cars coming to the market because of a fall in new car registrations last year, and the extensions of lease contracts and fewer part exchanges caused again by delays in new-car supply. The recent Prices Economic Analysis compares the growth in second-hand car prices in the UK with the Euro area and the United States.

There was also a large upward contribution of 0.07 percentage points from passenger transport by air. This reflects a 12-month inflation rate for air fares of 9.7%. Over the course of the pandemic, air travel has periodically been unavailable to consumers. This included the period from April to June 2020, and November 2020, as well as January to June 2021. Although air fares were available in both September 2020 and September 2021, there were some differences in price collection, reflecting differences in travel restrictions and the legality of travelling abroad that should be taken into consideration. More detail is provided in Section 4 of last month’s bulletin.

Restaurants and hotels

The contribution from restaurants and hotels fell to 0.34 percentage points in September 2021, down from 0.65 percentage points in August. This was the largest contribution that this division had made to the CPIH annual rate National Statistic series, which began in January 2006.

The August contribution was largely driven by widespread discounting of restaurant and cafe prices in the previous year. The government’s Eat Out to Help Out (EOHO) scheme ran in August 2020 and offered diners a 50% discount (up to a maximum of £10 per diner) on food and non-alcoholic drinks to eat or drink in every Monday, Tuesday and Wednesday at participating establishments. At the same time, a reduction in value-added tax (VAT) from 20% to 5% for the hospitality sector also contributed to a fall in prices. In September 2021, the reduced VAT rate was still in operation. It was increased for the hospitality sector from 1 October 2021 to 12.5%; however, this rise occurred after the period referred to in this bulletin.

In August 2020, the restaurants and hotels division made a downward contribution of 0.27 percentage points. This downward contribution continued into September and October (at 0.07 and 0.05 percentage points respectively), before resuming upward pressure on the CPIH 12-month inflation rate in November, of 0.04 percentage points. Since then, restaurants and hotels have made upward contributions of between 0.01 and 0.14 percentage points until August 2021, when the base effect from EOHO contributed to a larger upward contribution of 0.65 percentage points.

The 12-month inflation rate for restaurants and hotels was negative in September 2020, at -0.7%. At the time, some outlets continued to offer discounted meals to diners past the end of the EOHO scheme, and these were reflected in the September 2020 CPIH figures, provided that the terms of the offer exactly matched the terms of the EOHO scheme. The lower-than-usual level of the index at this time is part of the reason for the 0.34 percentage point contribution from this division in September 2021.

Housing and household services

The contribution from housing and household services increased from 0.65 in August 2021 to 0.69 percentage points in September 2021, the largest contribution from this division since October 2013 when it was also 0.69 percentage points. The main upward pressure came from owner occupiers’ housing costs, which contributed 0.32 percentage points, with further upward contributions of 0.13 percentage points from council tax and rates, 0.11 percentage points from actual rents, and 0.10 percentage points from electricity, gas and other fuels. Reductions to household utility prices in April 2020 saw the group’s contribution to the CPIH headline rate fall to 0.16 percentage points, but this fall was reversed in April 2021 with rises in gas and electricity prices.

Recreation and culture

During the period from April 2020 to January 2021, the largest contribution to the 12-month rate came from recreation and culture, reaching 0.35 percentage points in August 2020 then again in December 2020 and January 2021. This has since eased and currently contributes 0.31 percentage points to the CPIH annual rate. Contributions from this category are subject to short-term fluctuations as a result of price movements for items such as computer games. Historically, they have also been influenced by the imputation of price indices for some items that have been unavailable because of the coronavirus pandemic. Examples include package holidays and various recreational and cultural services.

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 inflation rate between August and September 2021. 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 fall in the CPIH annual rate for September 2021 is predominantly driven by a large downward contribution to change from restaurants and hotels. Most other divisions provided partially offsetting upward contributions with the exception of clothing and footwear, which made a small downward contribution to change, and health, and miscellaneous goods and services, which made negligible contributions to the change in the annual rate.

Restaurants and hotels

The largest contribution to the change in the CPIH 12-month inflation rate comes from restaurants and hotels, which decreased September 2021’s 12-month rate by 0.31 percentage points relative to August 2021. Of this, 0.30 percentage points came from the catering services group, which was largely driven by the end of widespread discounting under the August 2020 Eat Out to Help Out (EOHO) scheme. It should be noted, however, that some outlets chose to continue offering their customers discounted meals after the scheme ended and, where the terms of these discounts matched the terms of EOHO, these reductions were included in CPIH for September 2020. Although catering services saw a modest rise in prices of 0.3% in September 2021, the price rises a year earlier were larger at 4.1%.

In last month’s bulletin we presented analysis that suggested that the August 2021 CPIH 12-month inflation rate would have been 2.7%, had the discounts under the EOHO scheme not been applied in the previous year. This was lower than the official rate of 3.0%. For September 2021, there is no difference in the annual rate, which would remain at 2.9%, reflecting the temporary impact of the EOHO scheme. However, removing EOHO discounts would have slowed the rise in last September’s 1-month growth rate for catering services to 0.1%. Therefore, after the removal of EOHO discounts, catering services would have contributed 0.01 percentage points of the 0.2 percentage point rise from the estimated rate of 2.7% in August to the official rate of 2.9% in September 2021. This analysis does not include the reduction in value-added tax (VAT), which also came into effect in August 2020 and remained at 5% until 30 September 2021.

Transport

There was an offsetting upward contribution to the change in the CPIH 12-month inflation rate from transport, which increased the rate to September 2021 by 0.04 percentage points. This was mainly because of transport services, which increased the rate by 0.06 percentage points, and to a lesser extent used cars (0.01 percentage points). These movements were partially offset by small downward contributions to change from spare parts and accessories, and maintenance and repairs. While motor fuels has made a large contribution to the annual rate itself, it has not contributed to the change in the annual rate. This is because it made an equally large contribution to last month’s rate.

Within transport services, the majority of the contribution to change was from passenger transport by air, and passenger transport by sea and inland waterways. In both of these categories prices fell by more in September 2021 than in the same month a year earlier. This would normally lead to a downward contribution to change; however, because of the change in weights between 2020 and 2021 – both of which halved to two parts per thousand and one part per thousand respectively – the price falls this year have less influence than those in the previous year.

The CPIH weights for 2021 were adjusted to reflect spending in the base year, which was heavily influenced by the coronavirus (COVID-19) pandemic. This is because the CPIH follows the price development of a fixed basket of goods and services. The annual inflation rate, therefore, is consistent with the idea of showing the expected change in price of a fixed basket purchased one year earlier. More information on the calculation of weights for CPIH in 2021 can be found in the article, Coronavirus (COVID-19) and Consumer Price Inflation weights and prices: 2021.

Furniture and household goods

The prices of furniture and household goods increased by more in September 2021 than in the same month a year ago, leading to an upward contribution to change of 0.04 percentage points. This effect came largely from furniture and furnishings, which increased 3.8% in September, compared with 1.5% in the same month a year ago. Additionally, glassware, tableware and household utensils, and non-durable household goods contributed 0.01 percentage points each to the increase in the September 2021 annual rate, but were offset by a downward contribution to change of 0.02 percentage points from major and small household appliances.

More generally, in recent months, furniture and household goods has made equal or larger contributions to the change in the CPIH 12-month inflation rate. It increased the January annual rate by 0.08 percentage points, by 0.04 percentage points in March and by 0.06 percentage points in April. However, on the whole the annual rate for this division has been increasing since January, when it stood at 1.0%. It currently stands at 4.5%, which is the highest rate since February 2012.

Food and non-alcoholic beverages

Food and non-alcoholic beverages also made a large contribution to the change in the CPIH annual rate, increasing it by 0.04 percentage points to September 2021. Prices fell in the month to September 2021 by 0.2%; however, there was a greater fall in the same month last year (0.7%), which has led to an upward contribution to the change in the 12-month inflation rate this year. The upward movement was confined to the food group and was partially offset by non-alcoholic beverages, which pushed the CPIH annual rate down in September.

Unavailable items

For items that were unavailable in line with government guidelines in the early part of 2021, there were no January base prices. As these items become available again, base prices have been imputed in line with the procedures described in Coronavirus (COVID-19) and Consumer Price Inflation weights and prices: 2021.

For the first month in which they become available again, item indices are imputed using either the monthly movement in the all-available-items index or, for a smaller number of seasonal items, the annual movement in the all-available-items index. The aim is that the indices for returning items have a negligible impact on the all-items inflation rate in the first month of return, reflecting the fact that these services are available only as price levels and do not have price growth associated with them (relative to the January base). Collected prices then start to influence the index in the following month.

Restrictions began easing from 12 April 2021 and, as of September 2021, there are no items across the CPIH basket of goods and services that are unavailable to consumers. The changes to the list from previous months are shown in Table 58 in the Consumer price inflation dataset.

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) 12-month inflation rate in the context of wider housing-related costs. In September 2021, the contribution of housing components to the CPIH 12-month inflation rate was 0.69 percentage points, an increase of 0.04 percentage points from August 2021.

The main contribution to change in this division came from owner occupiers’ housing costs, where the contribution rose from 0.30 percentage points in August to 0.32 percentage points in September. Actual rents for housing and liquid fuels also contributed 0.01 percentage points each to the change in the annual rate, as a result of prices rising this year. All of the other housing components showed a negligible change in contribution. This follows larger changes to gas and electricity prices in April when the Office of Gas and Electricity Markets’ (Ofgem’s) price cap, introduced on 1 April 2021, saw prices of these utilities rise by over 9%. The cost of water supply and sewerage collection also rose by 2.5% and 1.0% respectively between March and April 2021. These price rises in total resulted in all groups within the housing and household services division having a positive contribution to the CPIH 12-month inflation rate from April 2021.

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 or annual 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 Consumer Prices Index including owner occupiers’ housing costs (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 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. 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 data time series.

Retail Prices Index (RPI)

The Retail Prices Index (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 data time series section of the inflation and price indices area of our website.

The UK Statistics Authority and HM Treasury launched a consultation in 2020 on the Authority’s proposal to address the shortcomings of the RPI. From 2030 (at the earliest), as outlined in the response to the consultation, the CPIH methods and data sources will be introduced into the RPI, and the supplementary and lower-level indices of the RPI will be discontinued.

Making our published spreadsheets accessible

This month, alongside our consumer price inflation tables, we have published sample versions of a selection of consumer price inflation tables prepared following the GSS guidance on releasing statistics in spreadsheets. It is essential that we aim to improve the usability, accessibility and machine readability of our published statistics so that everyone can make use of them. We have published these one-off sample tables to help communicate the changes we will be making to the consumer price inflation tables over the coming months. When we change over to the new format, there will be a period where we will publish the tables in both the new and the current formats, along with a mapper to help users find the information they require in the new format tables. If you have any questions or comments, please email cpi@ons.gov.uk.

Consultation on the Code of Practice for Statistics – proposed change to 9.30am release practice

On behalf of the UK Statistics Authority, the Office for Statistics Regulation (OSR) is conducting a consultation on the Code of Practise for Statistics, proposing changes to the 9.30am release practise. Please send comments by 21 December 2021 to regulation@statistics.gov.uk.

Coronavirus

Since the start of the coronavirus (COVID-19) pandemic, there have been challenges around our collection activities, as approximately 80% of the price quotes (45% by weight) for the Consumer Prices Index including owner occupiers’ housing costs (CPIH) basket are usually physically collected in stores across 141 locations in the UK. In April 2021, for example, we were unable to collect prices in store. However, we resumed in-store collections from May 2021 following the approach detailed in Consumer price statistics: resuming a field-based price collection. For August 2021, our price collectors were able to complete full collections in 96 of the locations with partial collections in the other 45, supplementing the latter by continuing to collect prices over the internet, by phone and by email.

The approach for resuming in-store collections was consistent with Eurostat advice, published in their Guidance note on Harmonised Index of Consumer Prices (HICP) issues emerging from the lifting of lockdown measures (PDF, 388KB).

Coronavirus and the effects on UK prices describes the approach taken for imputing price movements for items that are unavailable for consumers to purchase.

Coronavirus supplementary analysis

In March 2021, we published Effect of reweighting the consumer prices basket during the coronavirus (COVID-19) pandemic: October to December 2020, which contains Experimental statistics for both CPIH and the Consumer Prices Index (CPI). By linking the price changes between the latest month and the previous one on to the old series – a process called ”chain-linking” – we are able to change our expenditure weights each month to remove any unavailable items and adjust the weight of remaining items according to our best available evidence of consumption patterns.

Methodology information

The consumer price indices are normally based on prices collected from outlets around the country, supplemented by information collected centrally over the internet and by phone. As a result of the coronavirus pandemic, we collected all prices centrally in April 2021, but our price collectors have resumed in-store collections from May 2021.

The figures in this publication use data collected on or around 14 September 2021.

Consumer price indices, a brief guide gives an overview of consumer price statistics, while the Consumer Prices 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 CPIH, focusing on the approach to measuring owner occupiers’ housing costs (OOH).

Users and uses of consumer price inflation statistics includes information on the users and uses of these statistics, and the characteristics of the different measures of inflation in relation to potential use.

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 currently published and those under development. We have also published proposed updates in Measuring changing prices and costs for consumers and households, proposed updates: March 2020.

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 (HCIs) 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 RPI as a measure of inflation describes the issues with the RPI.