Consumer price inflation, UK: July 2021

• The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 2.1% in the 12 months to July 2021, down from 2.4% in the 12 months to June.

• The largest upward contribution to the CPIH 12-month inflation rate came from transport (0.85 percentage points).

• CPIH was unchanged on the month in July 2021, compared with a rise of 0.4% in July 2020.

• Clothing and footwear, and a variety of recreational goods and services made the largest downward contributions to the change in the CPIH 12-month inflation rate between June and July 2021.

• Price rises for second-hand cars, compared with falls a year ago, resulted in the largest, partially offsetting, upward contribution to change.

• The Consumer Prices Index (CPI) rose by 2.0% in the 12 months to July 2021, down from 2.5% to June; on a monthly basis, CPI was unchanged in July 2021, compared with a rise of 0.4% in July 2020.

• The number of CPIH items identified as unavailable in July 2021 fell to one, accounting for 0.04% of the basket by weight; we collected a weighted total of 87.2% of the comparable coverage collected before the first lockdown in 2020 (excluding unavailable items).

• Around 0.2 percentage points of the easing in the CPIH rate between June and July 2021 came from base effects, specifically from items that became available again in July 2020 at the end of the first coronavirus (COVID-19) lockdown.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 2.1% in the 12 months to July 2021, down from 2.4% to June. Inflation rates at this time are influenced by the effects of the coronavirus (COVID-19) lockdown in spring 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.

Around 0.2 percentage points of the easing in the CPIH 12-month rate between June and July 2021 came from base effects, specifically from items that became available again in July 2020 at the end of the first coronavirus lockdown. There were 55 items that became available at that time. The June 2020 indices for these items were imputed in line with published methodology such that they had no impact on the all items index. The collected prices in July 2020 had an upward effect on the index between June and July 2020, and consequently a downward effect on the change in the 12-month rate between June and July 2021.

The Consumer Prices Index (CPI) rose by 2.0% in the 12 months to July 2021, down from 2.5% to June.

On a monthly basis, both CPIH and CPI were unchanged in July 2021, compared with rises of 0.4% in July 2020. In 2021, price rises in transport were largely offset by price falls for clothing and footwear, and a variety of recreational goods. In 2020, the main upward contributions to the monthly rate came from transport, recreation and culture, and restaurants and hotels. More information on contributions to change is provided in Section 4.

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 0.85 percentage points in July 2021. This is the largest upward contribution from any division this month and the largest from transport since November 2011.

Within transport, the movements have been caused mainly 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. It has eased in July to 0.36 percentage points.

Average petrol prices stood at 132.6 pence per litre in July 2021, compared with 111.4 pence per litre a year earlier. The July 2021 price is the highest recorded since September 2013. In comparison, the UK was coming out of the first national lockdown at this point last year and petrol prices were starting to recover after a period of reduced demand.

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 0.18 percentage points in July 2021, the largest contribution from second-hand cars since May 2010.

These latest movements come amidst reports of increased demand as dealers opened following the latest national lockdown, together with a global semiconductor shortage affecting the production of new cars 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 now 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 latest Prices Economic Analysis compares the growth in second-hand car prices in the UK with the euro area and United States.

Housing and household services

The contribution from housing and household services was unchanged between June and July 2021, and the contributions in both months were significantly above those from April 2020 to March 2021. 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. The contribution has since eased back to 0.09 percentage points in July 2021. Contributions from this category are subject to short-term fluctuations as a result of price movements for items such as computer games and 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.

Clothing and footwear

For most months since March 2020, the contribution from clothing and footwear has been negative. It has turned positive from May 2021 in part because of the low prices experienced during the first coronavirus lockdown in 2020.

During 2020, clothing and footwear prices showed a different seasonal pattern compared with previous years, and they were clearly influenced by coronavirus restrictions. Then, in 2021, prices unusually fell between January and February, again potentially caused by coronavirus lockdown, before rising in subsequent months to June. In July, prices fell as usual during the summer sales season, albeit the incidence of sales in the datasets for both June and July was less than in recent years.

Figure 3 shows the seasonal price movements for clothing and footwear over the latest six years, setting January equal to 100 in each year. The fall in price into July 2021 is similar to that seen in most recent years and contrasts with the relatively flat picture in 2020. The indices in the latest two months are above those experienced in recent years in part because they are referenced on January 2021 when prices were relatively low, influenced again by the coronavirus lockdown.

Food and non-alcoholic beverages

Food and non-alcoholic beverages is the only division with a downward contribution (of 0.04 percentage points) in July 2021. This division has had a downward pull on the headline rate since November 2020, with the majority of the more detailed food categories contributing to the downward pull each month.

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 June and July 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.

Around 0.2 percentage points of the easing in the CPIH 12-month rate between June and July 2021 came from base effects, specifically from items that became available again in July 2020 at the end of the first coronavirus (COVID-19) lockdown. There were 55 items that became available at that time. The June 2020 indices for these items were imputed in line with published methodology such that they had no impact on the all items index. The collected prices in July 2020 had an upward effect on the index between June and July 2020, and consequently a downward effect on the change in the 12-month rate between June and July 2021.

There were downward contributions to the change in the CPIH 12-month inflation rate from 9 of the 12 divisions, partially offset by an upward contribution from transport.

Recreation and culture

The largest downward contribution (of 0.19 percentage points) to the change in the CPIH 12-month inflation rate came from recreation and culture, particularly data processing equipment; recording media; games, toys and hobbies; and package holidays.

With data processing equipment, the effect came from computer peripherals (such as routers and web cams) and software. The effects from recording media and games, toys and hobbies came from CDs and computer games respectively. Prices for these products could have been influenced by the coronavirus restrictions changing the timing of demand, though it is equally likely to be the result of the CDs and games in the bestseller charts used when collecting price quotes.

Prices for package holidays are estimated to have fallen slightly this year, compared with a rise, overall, a year ago. The index for package holidays was imputed in June 2020 because the component items were not available during the coronavirus lockdown whereas the July 2020 index was mostly based on collected prices. Both monthly indices were imputed in 2021. As a result, in both 2020 and 2021, the monthly price movements between June and July for package holidays have been estimated because the component items have not been available for both months. This means that the current contribution to change has to be interpreted with a degree of caution. The methodology used to estimate price movements for unavailable items is described in Coronavirus and the effects on UK prices.

Clothing and footwear

There was also a large downward contribution (of 0.09 percentage points) from clothing and footwear. Prices, overall, fell by 2.0% between June and July this year, compared with a smaller fall of 0.7% between the same two months a year ago. Normally, prices fall between June and July because of the summer sales season – see Figure 3 – but the seasonal patterns have been influenced by the timing of lockdowns since the onset of the coronavirus pandemic. In 2020 in particular, the fall was smaller than normally seen at this time of year.

The amounts of discounting recorded in the clothing and footwear datasets in both June and July 2021 were below the levels usually seen in these months. In comparison, in June and July 2020, the proportions of discounting were relatively high during and just after the first coronavirus lockdown when demand may have been reduced as a result of less browsing in stores, people spending more time at home where they might have been less interested in clothing, and a shift in spending patterns towards other necessities such as food and cleaning products. The downward effect this year came from a broad range of women’s and children’s clothing.

Restaurants and hotels

The downward contribution from restaurants and hotels arises from prices rising in 2021 by less than in 2020 for restaurant and café meals and drinks. A year ago, many of these items became available for consumers to purchase in July after being unavailable in June when the indices were estimated based on the movement in the index for all available CPI items. This means that the monthly movement between June and July 2020, and hence the current contribution to change in the headline rate, has to be interpreted with a degree of caution.

Elsewhere within the restaurants and hotels division, there was a small upward contribution from accommodation services, where prices, overall, rose between June and July this year, compared with a fall a year ago.

Other downward contributors

Smaller downward contributions came from alcoholic beverages and tobacco; furniture, household equipment and maintenance; communication; miscellaneous goods and services; and health. The effects came from a variety of more detailed goods and services within each group, for example, off-sales of spirits, telephone equipment and services, hairdressing, jewellery and childcare services. Prices rose for each of these goods and services between June and July 2020, compared with a mix of price falls and smaller price rises in 2021. Some of the rises in 2020, for example, for hairdressing, may partially relate to covering the costs for personal protective equipment (PPE). These additional costs have been collected in line with international guidance.

Transport

The largest, partially offsetting, upward contribution (of 0.05 percentage points) to the change in the CPIH 12-month rate came from transport, where prices rose by 1.8% between June and July 2021, compared with a smaller rise of 1.3% between the same two months of 2020. The effect was principally from second-hand cars and, to a lesser extent, maintenance and repairs.

Second-hand car prices rose between June and July this year whereas in recent years, they have tended to fall between these months. There are reports of prices rising as a result of increasing demand following the end of the latest national lockdown and some buyers are reported to have turned to the used car market as a result of delays in the supply of new cars caused by the shortage of semiconductor chips used in their production. Additionally, there are reportedly concerns in the trade about the supply of second-hand cars because of fewer trade-ins.

Charges for the maintenance and repair of motor vehicles have risen in 2021, compared with a fall in 2020. The effect came principally from changes in roadside recovery membership fees but also labour costs for car repairs and wheel alignment.

Within transport, there was a partially offsetting downward contribution from motor fuels and lubricants. The price of petrol rose by 2.9 pence per litre between June and July this year, compared with a larger rise of 4.9 pence per litre a year ago when prices were recovering from a four-year low of 106.2 pence per litre in May 2020. Similarly, diesel prices rose by 2.1 pence per litre this year, compared with a rise of 4.0 pence per litre a year ago. The movements reflect changes in oil prices as demand was affected last year by the coronavirus pandemic.

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.

As restrictions have eased from 12 April 2021, the number of items across the CPIH basket of goods and services that are unavailable to consumers has reduced to one in July, accounting for 0.04% of the CPIH basket by weight. The changes to the list from previous months, are shown in Table 58 in the Consumer price inflation dataset.

The remaining unavailable item is football admission prices. This made a negligible contribution to the change in the CPIH 12-month inflation rate between June and July 2021.

In addition to the one unavailable item and the 13 items returning to the CPIH basket in July, we identified two other items where, although available in theory, price collection had proved largely impossible, so we imputed the price movement. The categories where the number of price quotes used in constructing the indices is less than half the number used in February 2020 have been identified in relevant tables in the accompanying dataset, for example, in Table 3.

Overall, the number of price quotes that are usually collected in store and that are used in constructing the July 2021 indices was 95.2% of the number of price quotes collected in February 2020 (excluding unavailable items). Once all locally and centrally collected price quotes have been weighted together, the overall coverage for goods and services available in July 2021 was 87.2% of the comparable coverage collected before the March 2020 lockdown (excluding unavailable items).

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 July 2021, the contribution of housing components to the CPIH 12-month inflation rate was 0.63 percentage points, little changed from June 2021.

There have been only relatively small changes to the contributions from individual components between June and July 2021, from housing rents and owner occupiers’ housing costs. 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.

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 July 2021, our price collectors were able to complete full collections in 79 of the locations with partial collections in the other 62, 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 13 July 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.