FOI ref: FOI/2021/3450
You asked
Why, when all prices were increasing, did the official Consumer Price Index (CPI) figure dropped to 3.1 in Sept 2021?
Please advise and provide documents to support the statistics showing this drop and subsequent rise in Octopber 2021.
We said
Thank you for your query about the drop in the Consumer Prices Index (CPI) inflation rate to 3.1% in September 2021.
The inflation rate depends on price movements in both the latest and previous year. In 2021, prices rose between August and September, but they rose by less than between the same two months of 2020 and, as a result, the 12-month rate eased from 3.2% to 3.1%. This note attempts to explain how price movements in both the current and previous year affect inflation.
The main reason why the inflation rate fell between August and September 2021 relates to the effects of the Eat Out to Help Out (EOHO) scheme in August 2020. This scheme resulted in large price falls in the restaurants and hotels section of the CPI in August 2020, leading to a relatively high inflation rate of 3.2% in August 2021. At the time, it was the highest rate observed since March 2012.
When the EOHO scheme officially ended in September 2020, prices rose overall by 0.4% on the month. This is more than the 0.3% rise observed between August and September 2021 and led to the slight easing in the inflation rate between August and September 2021.
The effect is described in more detail in section 4 of our September 2021 release, albeit in the context of the Consumer Prices Index including owner occupiers' housing costs (CPIH). This is an extension of the CPI to include a measure of the costs associated with owning, maintaining and living in one's own home.
In October 2021, the CPI inflation rate rose to 4.2% principally because of price rises for domestic gas and electricity following a change in the cap on energy prices applied by the Office of Gas and Electricity Markets (Ofgem). This effect is described in section 4 of our October 2021 release, again in the context of CPIH.
The Consumer Prices Index is a National Statistic, meaning that it complies fully with the Code of Practice for Statistics, that is, it meets the highest standards of trustworthiness, quality, and value. Its compliance is assessed independently by the Office for Statistics Regulation. Further, the procedures used in its production are externally audited against an international standard for quality (ISO9001), and the methodology used meets international standards and is in line with European regulations.
If you are interested in how we produce the index, there is summary information in our brief guide with a fuller description in our technical manual.