Consumer price inflation, UK: January 2020

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

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Cyswllt:
Email Andy King

Dyddiad y datganiad:
19 February 2020

Cyhoeddiad nesaf:
25 March 2020

1. Main points

  • The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.8% in January 2020, increasing from 1.4% in December 2019.

  • The largest contribution to the CPIH 12-month inflation rate in January 2020 came from housing, water, electricity, gas and other fuels (+0.55 percentage points), which increased by 0.19 percentage points since December 2019.

  • The largest upward contributions to the change in the CPIH 12-month inflation rate between December 2019 and January 2020 came from gas and electricity prices; fuels and lubricants; clothing; and airfares.

  • The Consumer Prices Index (CPI) 12-month rate was 1.8% in January 2020, increasing from 1.3% in December 2019.

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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 1.8% in January 2020, increasing from 1.4% in December 2019.

The CPIH 1-month inflation rate was -0.2% in January 2020, compared with -0.6% in January 2019.

The Consumer Prices Index (CPI) 12-month inflation rate was 1.8% in January 2020, increasing from 1.3% in December 2019.

Given that the owner occupiers’ housing costs (OOH) component accounts for around 17% 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.

In January 2020, the largest upward contribution to the CPIH 12-month inflation rate came from housing and household services. Despite the division providing the largest upward contribution since November 2018, its contribution has fallen since May 2019 as a result of falling contributions from electricity, gas and other fuels. However, in January 2020, its contribution increased to 0.55 percentage points (an increase of 0.19 percentage points from December 2019), as the gas and electricity price reductions from January 2019 unwound.

The contribution from transport also increased in January 2020. Falling contributions from motor fuels and transport services had meant the division’s overall contribution fell to 0.08 percentage points in December 2019, the second lowest level since July 2016. Rising pump prices and upward contributions from transport services (in particular, airfares) meant transport’s contribution rose to 0.22 percentage points in January 2020.

The contribution to the CPIH 12-month inflation rate from restaurants and hotels increased to 0.21 percentage points in January 2020, from 0.16 percentage points in December 2019. Accommodation services prices overall fell between December 2019 and January 2020 by 1.3% compared with a larger fall of 2.9% in the month to January 2019, with the resulting increase to the contribution to the CPIH 12-month inflation rate coming mainly from overnight hotel accommodation.

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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 December 2019 and January 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 upward contribution to the change in the CPIH 12-month rate (of 0.19 percentage points) came from housing and household services, where gas (contributing 0.09 percentage points) and electricity (contributing 0.07 percentage points) prices were unchanged in January 2020 but fell a year ago. In January 2019, the fall in prices partially reflected the response from energy providers to the Office of Gas and Electricity Markets’ (Ofgem’s) initial energy price cap, which came into effect from 1 January 2019.

The second largest upward contribution to the change in the CPIH 12-month inflation rate (of 0.14 percentage points) came from transport, where the main upward contributions came from fuels and lubricants, and airfares. Prices at the pump rose between December 2019 and January 2020 but fell between December 2018 and January 2019. Petrol prices increased by 2.3 pence per litre between December 2019 and January 2020, to stand at 126.9 pence per litre, and diesel prices increased by 2.6 pence per litre, to stand at 132.5 pence per litre. In comparison, between December 2018 and January 2019, petrol and diesel prices fell by 2.1 and 2.4 pence per litre, to stand at 119.6 and 129.5 pence per litre, respectively. There was also a large upward contribution from airfares where prices fell between December 2019 and January 2020 by 17.9%, compared with a fall of 25.5% a year earlier. There were further small upward contributions from vehicle maintenance and repairs, and other services. These upward contributions were partially offset by small downward contributions from rail and sea fares and the purchase of vehicles.

Clothing and footwear also had a large upward contribution to the change in the CPIH 12-month inflation rate (of 0.07 percentage points) with the main contribution coming from women’s clothing. Prices for clothing overall fell by 3.3% between December 2019 and January 2020, compared with a fall of 4.6% between December 2018 and January 2019. There was no evidence to suggest a reduction in the proportion of items being recorded on sale compared with January 2019, despite evidence of increased discounting reported in December 2019.

There was also a large upward contribution (of 0.05 percentage points) to the change in the CPIH 12-month inflation rate from restaurants and hotels. Overall, prices for overnight hotel accommodation fell by 3.9% between December 2019 and January 2020, compared with a fall of 9.1% between December 2018 and January 2019.

There was a large partially offsetting downward contribution from furniture, household equipment and maintenance where prices overall fell by 3.1% between December 2019 and January 2020, compared with a fall of 2.1% between December 2018 and January 2019. The main downward movement came from furniture and furnishings, in particular from settees and double beds.

There was a small downward contribution of 0.02 percentage points from food and non-alcoholic beverages, where prices overall fell by 0.1% between December 2019 and January 2020, compared with a rise of 0.1% a year earlier. There were downward contributions from margarine or low-fat spread; fish; fruit; and fruit squash. These were partially offset by upward contributions from bread and cereals; and sugar, jam, syrups, chocolate and confectionery.

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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 January 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 because of recent reductions in costs paid by suppliers, mainly wholesale energy costs. This meant that, from October 2019, the contribution to the CPIH 12-month inflation rate from electricity, gas and other fuels became negative. However, in January 2020, it provided an upward contribution (increasing to 0.13 percentage points) 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, though there was little change in its contribution when the 2019 increases were introduced in April this year. Conversely, the reduction in the contribution from rents is likely to be a result of the policy to reduce social housing rent, which started in April 2016, although the contribution has risen slightly over the last year. 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 19 February 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 19 February 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 and an at-a-glance comparison with other measures, please see the time series section of the inflation and price indices area of our website.

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8. Measuring the data

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 Consumer Prices Index (CPI), the rules underlying the construction of the Harmonised Index of Consumer Prices (HICP), developed by Eurostat in conjunction with EU member states and EEA countries.

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 14 January 2020.

When the indices for February are published on 25 March 2020, they will be based on the 2020 weights structure (including the updated basket of goods and services) and a new source of information for some of the underlying low-level weights used to aggregate prices. The 2020 consumer price inflation basket of goods and services will be published on 16 March 2020 and the 2020 consumer price inflation updated weights will be published on 19 March 2020. The Impact of introducing a new data source for shop-type weights on consumer price indices article (published on 12 February 2020) describes the change of source that is being made.

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 manual has been updated and a new version published on 18 September 2019.

The Consumer Prices Index including owner occupiers' housing costs (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: 2019 provides an overview of the latest annual update of the relative weights of items used in compiling the UK consumer price inflation indices.

Consumer price inflation basket of goods and services: 2019 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, 38KB) 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

Thank you for those responses to the consultation on the use made of data on the formula effect in the Retail Prices Index: Table 35 of the consumer price inflation dataset.

The RPI formula effect series (CDID: CRFT, CRFU and CRFV) were published as experimental series and are currently used by a limited number of users. Having reviewed the responses we have received, we have made the decision to cease the publication of these series from the February 2020 consumer price inflation publication (scheduled for publication on 25 March 2020).

These are not the formula effect series, which are published as part of the reconciliation of CPIH with RPI and CPI with RPI in Table 5 of the consumer price inflation dataset. Those series 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. Specifically, they 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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Manylion cyswllt ar gyfer y Bwletin ystadegol

Andy King
cpi@ons.gov.uk
Ffôn: Consumer Price Inflation Enquiries: +44 (0)1633 456900. Consumer Price Inflation recorded message (available after 9.45am on release day): +44 (0)800 0113703