Consumer price inflation, UK: February 2017

• The Consumer Prices Index including owner occupiers’ housing costs (CPIH, not a National Statistic) 12-month inflation rate was 2.3% in February 2017, up from 1.9% in January.
• The rate in February 2017 was the highest since September 2013, having steadily increased since late 2015.
• Rising transport costs, particularly for fuel, were the main contributors to the increase in the rate.
• Prices for food increased by 0.3% between February 2016 and February 2017, following 31 consecutive months of prices falling on the year.
• The Consumer Prices Index (CPI) 12-month rate was also 2.3% in February 2017, compared with 1.8% in January.
• While the CPI and CPIH rates were the same in February 2017, the 2 series usually report different rates; over the last 2 years CPIH has been, on average, 0.3 percentage points above CPI, while over the last decade CPI has been, on average, 0.2 percentage points above CPIH.

As the most comprehensive measure of inflation, we have expanded the commentary on the Consumer Prices Index including owner occupiers’ housing costs (CPIH). CPIH 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. A blog post by the Deputy National Statistician explains our approach to including housing costs in CPIH and further information is available on our quality and methodology page.

To ensure that CPIH is of the best possible quality, the entire back series of CPIH from 2005 has been revised to incorporate Council Tax and revised weights for owner occupiers’ housing costs. An explanation of the impact of the changes is available. We do not expect to make further historical revisions to the index.

CPIH is not currently a National Statistic. It has been reassessed by the Office for Statistics Regulation (OSR) against the standards set out in the Code of Practice for Official Statistics. The assessment report published on 3 March 2016 included a number of requirements that need to be implemented for CPIH to regain its status as a National Statistic and we are working to address these.

The Consumer Prices Index (CPI) continues to be a National Statistic and is produced to international standards. It is published at the same level of detail as before, in the accompanying datasets and time series dataset.

We have made 2 methodological improvements to CPI, CPIH and their supplementary indices. The first is an improvement to the way in which chain-linking is conducted and is the result of an independent review of our method. The second is the implementation of an additional level in the Classification Of Individual Consumption by Purpose (COICOP) structure, known as COICOP5, which provides a more detailed picture of inflation. Both of these improvements also help us to better meet EU regulations, as the UK CPI is identical to the UK Harmonised Index of Consumer Prices (HICP), which provides a comparable measure of inflation across Europe. Further information on the impact of these changes is available and COICOP5 data can be found in the datasets and time series dataset.

Following consultation and a statement by the National Statistician, certain RPI-related indices have been discontinued. RPI, its sub-components and RPIX continue to be published. Clarification of publication arrangements for the Retail Prices Index and related indices provides further information.

Guide to changes to consumer price inflation statistics in March 2017 summarises the changes.

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. A 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 2 months. The size and direction of these contributions depends on both how prices changed between the latest 2 months this year and between the same 2 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 2 months a year ago. Explaining the contribution to change in the 12-month rate covers this concept in more detail.

Aside from including owner occupiers’ housing costs (OOH) and Council Tax, CPIH is otherwise identical to CPI. This means that, aside from these 2 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 figures in this publication use data collected on or around 14 February 2017.

The year 2015 saw very low inflation, with the CPIH 12-month rate remaining just above zero for much of the year. Towards the end of 2015, the rate began to climb steadily and is now at its highest since September 2013. Section 5 explains the reasons behind the increasing rate.

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.

Whilst CPIH and CPI show similar trends over time and both stood at 2.3% in February 2017, they usually report different rates. Over the last 2 years, the 12-month rate for CPIH has been on average 0.3 percentage points higher than for CPI. This is because the rate for OOH has been higher than the CPI during this period, continuing to climb as the CPI rate fell to around zero in early 2015. More recently, the inflation rate for goods and services other than OOH has risen, whereas the rate for OOH has remained largely flat. This has meant that the 2 indices have become more closely aligned.

Figure 2 shows that prices for all the broad categories of goods and services except clothing had an upward effect on the CPIH 12-month rate in February 2017. Transport prices continue to make the largest contribution, which is largely due to increasing fuel prices.

There has been a sustained period of deflation of food prices since mid-2014, during which the 12-month rate was often lower than negative 3.0%. Although the increase in price of 0.3% between February 2016 and February 2017 is small, this equates to a 0.02 percentage points upward contribution to the 12-month rate, which marks the first time that food prices have had an upward effect since April 2014.

Figure 3 shows how each of the main groups of goods and services impacted on the change in the 12-month rate between January and February 2017. The majority of groups had an upward effect on the rate.

The largest upward effect came from transport. Within this category, prices for motor fuels made the largest contribution, with prices increasing by 1.2% between January and February 2017. Fuel prices tend to reflect movements in global oil prices and part of the increase in oil prices during 2016 to date can be explained by depreciation of sterling against the US dollar. The impact of fuel prices on the change in the 12-month rate is also influenced by what happened in the same period last year, when prices fell by 1.0%. Rising prices of vehicles also had an upward effect, particularly for second-hand cars. Smaller upward effects resulted from rises in sea and coach fares.

The upward effect from the recreation and culture category was due to a combination of smaller contributions from a wide range of items across the sector. Notably, the price of personal computers (including laptops and tablets) increased by 2.3% between January 2017 and February 2017, having fallen by 5.1% a year ago.

Food prices, overall, rose by 0.8% between January 2017 and February 2017, compared with a smaller rise of 0.1% a year earlier. The upward effect on the change in the 12-month rate came from a wide range of food items, although there were particularly large price rises for certain vegetables, which are consistent with reports of poor growing conditions in southern Europe affecting availability. For example, the price of an iceberg lettuce increased by 67.2% between January and February 2017, having fallen by 0.8% a year earlier.

Owner occupiers’ housing costs increased by 0.1% between January and February 2017, the same as between these months a year ago. This meant that they had a negligible impact on the change in the 12-month rate.

Figure 4 shows the contribution of OOH and Council Tax to the CPIH inflation rate in the context of wider housing-related costs. OOH has consistently been the largest contributor to the rate and increases in Council Tax in 2016 mean that this is now the second largest. Taken together, these 2 components account for 0.5 percentage points of the overall CPIH rate of 2.3%.

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. The negative contribution from utility bills that was seen throughout 2015 and 2016 has subsided in recent months, whilst regular maintenance and repair, along with water and sewerage services, tend to make a very small contribution to the 12-month rate.

Data relating to the Retail Prices Index are available in the accompanying datasets and time series dataset.

Other important measures of inflation and prices include Producer Prices Indices, the House Price Index and the Index of Private Housing Rental Prices (IPHRP). Prices economic commentary: March 2017 presents further analysis of these in addition to CPIH.

The individual price quotes (for locally collected items only) and item indices that underpin the consumer price inflation statistics are available.

The Harmonised Index of Consumer Prices (HICP) provides a comparable measure of inflation for each member state of the European Union. The UK HICP is identical to the UK CPI. Further information is available on the Eurostat website.

The Consumer Price Inflation Quality and Methodology Information page 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 CPIH, with a focus on the approach to measuring owner occupiers’ housing costs.

The Consumer price inflation basket of goods and services article details the annual review process for the items making up the inflation basket used to calculate the UK consumer price inflation indices and how and why the various items in the basket are chosen.

An article on updating weights describes the latest changes to the relative weights of items in the inflation basket to ensure they remain representative of current consumer spending patterns.