Consumer price inflation, UK: March 2015

• The Consumer Prices Index (CPI) was unchanged in the year to March 2015, that is, a 12-month rate of 0.0%, the same rate as in the year to February 2015

• Falls in clothing and gas prices produced the largest downward contributions to change in the inflation rate

• These were offset by a rise in the price of motor fuels and smaller upward contributions from a variety of other products such as food

• CPIH (not a National Statistic) grew by 0.3% in the year to March 2015, unchanged from February 2015

Consumer price inflation is the speed at which the prices of goods and services bought by households rise or fall. Consumer price inflation is estimated by using price indices. A way to understand a price index is to think of a very large shopping basket containing all the goods and services bought by households. The price index estimates changes to the total cost of this basket. Consumer price indices are published monthly.

A video and an infographic explain how consumer price inflation is calculated.

A price index can be used to measure inflation in a number of ways. The most common is to look at how the index has changed over a year. This is calculated by comparing the price index for the latest month with the same month a year ago. This is known as the 12-month inflation rate. This bulletin measures inflation to March 2015, so the 12-month rate measures changes in prices between March 2014 and March 2015.

A range of measures of consumer price and other price inflation are published. A tale of many price indices summarises information on the different measures.

What is the 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 also used for purposes such as uprating pensions, wages and benefits and can aid in the understanding of inflation on family budgets. For more information see Users and uses of consumer price inflation statistics (100.5 Kb Pdf) .

Latest figure and long-term trend

The CPI 12-month rate (the amount prices change over a year) between March 2014 and March 2015 stood at 0.0%. This is the joint lowest 12-month rate on record alongside the rate in February 2015.

Over the last 5 years, the 3 main contributors to the 12-month inflation rate have been: transport (including motor fuels); housing, water, electricity, gas and other fuels; and restaurants and hotels. Combined, these 3 sectors have, on average, accounted for around half of the 12-month inflation rate.

In the year to March 2015, food prices fell by 3.2% and prices of motor fuels fell by 13.7%. In both cases, the falls were smaller than in the year to February but the 2 groups still provided the largest downward contributions to the 12-month rate for March. In total, the food and motor fuels groups reduced the CPI 12-month rate by approximately 0.8 percentage points. An article was published in November 2014 which outlined some possible factors that may be affecting prices (477.2 Kb Pdf) .

Figure A shows the contributions to the CPI 12-month rate in March 2015 compared with the contributions to the 12-month rate a year earlier. A larger version of the chart can be viewed by clicking on it (HTML version only).

Figure B shows the CPI 12-month rate over the last 10 years. Table A shows the CPI 1-month rate (the amount prices change between 2 consecutive months), 12-month rate and index values for the last year. A larger version of the chart can be viewed by clicking on it (HTML version only).

This section explains which goods and services had the biggest impact on the change to the 12-month rate between February and March 2015 and, where relevant, considers the longer-term inflationary trends for these goods and services.

The change in the CPI 12-month rate can be calculated by comparing the 12-month rates for 2 consecutive months. An alternative, and equally valid, approach is to calculate it by comparing the price change between the latest 2 months and the price change between the same 2 months a year ago. Explaining the contribution to change in the 12-month rate (37.1 Kb Pdf) is a diagram explaining the calculation.

The CPI rose by 0.2% between February and March 2015 compared with a rise of 0.2% between the same 2 months a year earlier. The 1-month movement was therefore the same in both years and this led to the CPI 12-month rate remaining at 0.0% for a second month.

The largest downward contributions to change in the CPI 12-month rate between February and March 2015 came from:

• clothing and footwear: prices, overall, fell by 0.1% between February and March this year, compared with a rise of 1.8% between the same 2 months a year ago. This is the first time that prices have fallen between February and March since the CPI was introduced. Normally prices rise as they continue to recover following the January sales period. The downward contribution came from price movements for a range of women’s outerwear, particularly trousers, dresses and cardigans. There was also a smaller downward effect from men’s outerwear.

• housing and household services: prices, overall, fell by 0.4% between February and March 2015 compared with a smaller fall of 0.1% between the same 2 months a year ago. The downward effect came from changes in gas prices, with average bills falling by more this year than a year ago.

• restaurants and hotels: prices, overall, rose by 0.2% between February and March this year compared with a larger rise of 0.5% a year ago.

The largest upward contributions to change in the CPI 12-month rate between February and March 2015 came from:

• transport: prices, overall, rose by 0.7% between February and March 2015 but were little changed between the same 2 months a year ago. The upward contribution came principally from motor fuels. Average petrol prices rose by 3.8 pence per litre between February and March this year compared with no change between the same 2 months a year ago. Diesel prices also rose this year by 3.5 pence per litre but fell by 0.4 pence per litre a year ago.

• food and non-alcoholic beverages: prices, overall, fell by 0.2% between February and March 2015, compared with a larger fall of 0.5% between the same 2 months a year earlier. Small upward effects came from 4 product groups: milk, cheese and eggs; vegetables; sugar, jam, syrups, chocolate and confectionery; and mineral waters, soft drinks and juices. These were partially offset by small downward contributions from meat and fruit.

Figure C shows the contributions to change from each part of the CPI basket of goods and services. A larger version of the chart can be viewed by clicking on it (HTML version only).

The National Statistics status of CPIH has been discontinued pending work to investigate and improve the method for measuring owner occupiers' housing costs in this index. Full details can be found on the UK Statistics Authority website and in an explanatory note (313.9 Kb Pdf) on our website. The improvements from the resulting development work were introduced as part of the February 2015 dataset with the historical series revised back to 2005. Further information on the changes is available in 2 articles: Improvements to the measurement of Owner Occupiers’ Housing Costs and Private Housing Rental Prices (2.48 Mb Pdf) and Revising the weight of Owner Occupiers’ Housing in CPIH (197.4 Kb Pdf) .

CPIH is a measure of UK consumer price inflation that includes owner occupiers’ housing costs (OOH). These are the costs of housing services associated with owning, maintaining and living in one’s own home. OOH does not include costs such as utility bills, minor repairs and maintenance, which are already included in the index. CPIH uses an approach called rental equivalence to measure OOH. Rental equivalence uses the rent paid for an equivalent house as a proxy for the costs faced by an owner occupier. In other words this answers the question “how much would I have to pay in rent to live in a home like mine?” for an owner occupier. OOH does not seek to capture increases in house prices. Although this may be inconsistent with some users’ expectations of measures of OOH, the inclusion of an asset price and therefore capital gains would make the index less suitable for a measure of consumption. OOH currently accounts for 17.8% of the expenditure weight of CPIH. This compares with a weight of 19.5% in 2005.

Currently, the method of calculation, the population coverage and the basket of goods and services are the same as the Consumer Prices Index (CPI), with the exception of OOH. The method of deriving the weights for CPIH and the data used for these are also the same as for CPI, with the exception of OOH. This can result in some differences from the CPI.

In March 2015, the 12-month rate (the rate at which prices increased between March 2014 and March 2015) for CPIH stood at 0.3%, unchanged from February. The difference between the CPI and CPIH annual rates in March 2015 was 0.3 percentage points, the same as the difference in February, despite a small upward contribution from rising owner occupiers’ housing costs.

Figure D shows the CPIH and OOH component 12-month rates since January 2006 (the earliest date for which the CPIH 12-month rate can be calculated). The CPI 12-month rate has been included for comparative purposes. Table B shows the CPIH and OOH component 1-month and 12-month rates and index values for the last year. A larger version of the chart can be viewed by clicking on it (HTML version only).

In accordance with the Statistics and Registration Service Act 2007, the Retail Prices Index and its derivatives have been assessed against the Code of Practice for Official Statistics and found not to meet the required standard for designation as National Statistics. The full assessment report can be found on the UK Statistics Authority website.

The RPI is a long-standing measure of UK inflation that has historically been used for a wide range of purposes such as the indexation of pensions, rents and index-linked gilts. For further information see Users and uses of consumer price inflation statistics (100.5 Kb Pdf) .

RPIJ is an improved variant of the Retail Prices Index, which is calculated using formulae that meet international standards. The rationale for creating RPIJ was to give users a better alternative to the RPI if their needs were for a measure of inflation based on the same population, classifications, weights, etc as the RPI. Currently, RPIJ also acts as an analytical series in that it allows users to see the impact of using the Jevons (which meets international standards) in place of the Carli formula (which does not meet international standards) in the RPI. The use of the different formulae at the elementary aggregate level is currently the only difference between the 2 indices. Detailed goods and services indices are not produced for RPIJ.

In March 2015, the 12-month rate for RPIJ stood at 0.3%, down from 0.4% in the year to February 2015.

The RPI 12-month rate for March 2015 stood at 0.9%, meaning that it was 0.6 percentage points higher than it would have been had it used formulae that meet international standards.

Figure E shows the RPI and RPIJ 12-month rates for the last 10 years. Over this period, the RPIJ 12-month rate has been, on average, 0.5 percentage points lower than the RPI but the difference has increased to an average of 0.6 percentage points over the last 3 years. Cumulatively, inflation as measured by the RPI is 35.0% over the 10-year period, compared with 28.0% as measured by RPIJ. The use of the Carli formula has therefore added 7.0 percentage points to the change in prices over the last 10 years. A larger version of the chart can be viewed by clicking on it (HTML version only).

Table C shows the RPI and RPIJ 1-month and 12-month rates and index values for the last year.

For users who want to understand the causes of the difference between the CPI and RPI, please see Table 5 in the Consumer Price Inflation Reference Tables (2.22 Mb Excel sheet) of the March release.

Table D outlines where data for all consumer price inflation statistics can be found.