Consumer price inflation, UK: June 2020

• The Consumer Prices Index including owner occupiers' housing costs (CPIH) 12-month inflation rate was 0.8% in June 2020, up from 0.7% in May 2020.

• The largest contribution to the CPIH 12-month inflation rate in June 2020 came from recreation and culture (0.32 percentage points).

• Rising prices for games and clothing resulted in the largest upward contributions to the change in the CPIH 12-month inflation rate between May and June 2020.

• Falling prices for food resulted in a partially offsetting downward contribution to the change.

• As a result of the ongoing coronavirus (COVID-19) pandemic, we identified 67 CPIH items that were unavailable to UK consumers in June, as detailed in Table 58 of the Consumer price inflation dataset; these account for 13.5% of the CPIH basket by weight and made a downward contribution of 0.02 percentage points to the change in the CPIH 12-month rate; the number of unavailable items is down from 74 in May and 90 in April; for June, we have collected a weighted total of 84.0% (excluding unavailable items) of the number of price quotes collected for February (the most recent "normal" collection).

• The Consumer Prices Index (CPI) 12-month rate was 0.6% in June 2020, up from 0.5% in May.

The Consumer Prices Index including owner occupiers' housing costs (CPIH) 12-month inflation rate was 0.8% in June 2020, up from 0.7% in May 2020.

The Consumer Prices Index (CPI) 12-month inflation rate was 0.6% in June 2020, up from 0.5% in May.

The CPIH and CPI 1-month inflation rates were both 0.1% in June 2020, compared with 0.0% in June 2019.

Given that the owner occupiers' housing costs (OOH) component accounts for around 16% 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.

Over the last 10 years, the largest contribution to the annual CPIH inflation rate had come from either housing and household services or transport. However, this changed in April 2020 because of a combination of reduced household utility bills and falling motor fuel prices. Since then, the largest contribution has come from recreation and culture. In June, the contribution was 0.32 percentage points. Despite not being the largest historically, recreation and culture has been one of the main contributors to the headline rate since 2017.

Between November 2018 and March 2020, the largest upward contribution to the CPIH inflation rate came from housing and household services. However, this group's contribution fell from 0.51 percentage points in March 2020 to 0.16 percentage points in April, and remained around the same level in May and June.

Over the last two years, the contribution from transport has shown more variation than any other group, ranging from an upward contribution of 0.75 percentage points in August 2018 to a downward contribution of 0.20 percentage points in May 2020. Much of the movement comes from changes in the price of motor fuels, though contributions from air fares and second-hand cars have also changed noticeably over the period.

The downward contribution from transport in June 2020 was caused by a downward contribution of 0.41 percentage points from motor fuels, partially offset by smaller upward contributions from other transport components. Average petrol prices stood at 106.5 pence per litre in June 2020, slightly higher than 106.2 pence in May, which was the lowest price observed since April 2016. Average diesel prices were 112.7 pence per litre in June, the lowest since August 2016.

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 May and June 2020. The corresponding figures for the Consumer Prices Index (CPI) can be found in column F of Table 26 in the Consumer price inflation dataset.

The largest upward contribution (of 0.09 percentage points) to the change in the CPIH 12-month inflation rate between May and June 2020 came from recreation and culture, where prices overall rose by 0.2% between May and June this year, compared with a fall of 0.4% between the same two months a year ago. Within this broad group, the upward contribution came from games, toys and hobbies, particularly computer games and computer games consoles. Prices in this category overall rose by 1.8% this year, compared with a fall of 4.7% a year ago.

Over the year-to-date, price movements for games, toys and hobbies have been less volatile than during the same period last year. It is possible that prices have been influenced by the coronavirus (COVID-19) lockdown changing the timing of demand and the availability of some items, particularly consoles. However, it is equally likely to be a result of the computer games in the bestseller charts. Price movements for computer games can often be relatively large depending on the composition of these charts.

There was also a large upward contribution of 0.05 percentage points from clothing and footwear, with prices falling very slightly this year, compared with a larger fall between May and June 2019. Price movements this year have not followed the normal seasonal pattern. In recent years, prices have generally risen between January and May before the summer sales season starts in June. During 2020, prices rose as usual between January and February but have since broadly fallen, overall showing a flatter picture than in preceding years, with a greater incidence of sales observed across all months since the beginning of lockdown.

That picture has continued into June, with prices relatively stable on the month compared with a 1.0% fall last year, and with the dataset showing that 17.5% of the quotes collected were at sale prices compared with 8.3% last year. The upward contribution to the change in the rate between May and June comes from across almost the full range of men's clothing, while women's clothing shows a more mixed picture across the different products but with the overall effect still upward.

A smaller upward contribution (of 0.03 percentage points) came from health, where prices overall rose by 1.7% this year, compared with a rise of 0.3% a year ago. The effect came from pharmaceutical products, particularly cough liquid, and other medical and therapeutic products, particularly daily disposable soft contact lenses. The overall upward contribution largely reverses a downward contribution to the change between April and May.

The largest, partially offsetting, downward contribution (of 0.06 percentage points) to the change in the CPIH 12-month inflation rate between May and June came from food and non-alcoholic beverages, with prices falling by 0.6% this year, compared with a rise of 0.1% a year ago. The effect comprised small movements from a variety of product groups, with the largest (of 0.03 percentage points) coming from vegetables. The largest individual downward contribution in this category came from premium potato crisps, reversing the upward contribution observed between April and May.

There was a small downward contribution (of 0.03 percentage points) from restaurants and hotels, where prices overall fell by 0.3% this year, compared with a fall of 0.1% a year ago. Part of the contribution came from muffins and individual cakes but part was the effect of imputing for items that could not be priced during June.

Overall, there were 67 unavailable items in the CPIH plus a further nine items where prices were available in theory but had to be imputed because few, if any, price quotes could be collected. In total, these had a downward contribution of 0.05 percentage points to the change in the CPIH 12-month inflation rate. Most imputed items had no overall contribution to the change in the headline CPIH inflation rate. The largest downward contributions (each of 0.01 percentage points) came from items such as pub meals, restaurant main courses, live music event admissions, self-catering foreign holidays and coach fares, while there was a partially offsetting upward contribution from hotel overnight accommodation (of 0.01 percentage points).”

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. In April 2020, the contribution of housing components to the CPIH 12-month inflation rate fell to its lowest level since November 2010 and remained around that same level through to June. The fall since March was caused by reduced contributions from electricity, gas, liquid fuels, water supply and sewerage collection. These five categories had a combined downward contribution to the CPIH 12-month rate of 0.22 percentage points in June.

Looking across a longer timeframe, 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 2020. The measurement of OOH uses the rent paid for an equivalent house as a proxy for the costs faced by an owner occupier. It includes the rents paid for all lets, not just new lets, so that changes in rents take longer to feed through than in the case of measures based on new lets only.

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. There was a negative contribution from electricity, gas and other fuels between October and December 2019, before the price reductions in January 2019 unwound leading to an upward contribution from January 2020. The latest price cap, introduced on 1 April 2020, saw prices of electricity rise slightly (by 0.2% on the month) and gas prices fall by 3.5%, compared with larger electricity and gas price rises of 10.9% and 9.3% respectively in April 2019.

The increases in Council Tax that started in 2016 caused its contribution to rise over the following few years, but there was little change when the 2019 increases were introduced in April last year and a slight easing in the contribution in April this year.

The reduction in the contribution from rents between 2016 and 2018 is likely to be a result of a policy to reduce social housing rent. The contribution from rent in total though, has subsequently risen since early 2018.

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. The contribution from water and sewerage services turned negative in April this year when bills were reduced as a result of the Water Services Regulation Authority (Ofwat) encouraging suppliers to reduce household bills.

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, please see the time series section of the inflation and price indices area of our website.

The UK Statistics Authority recommended in 2019 that the publication of the RPI should be stopped at a point in the future and that in the interim, the shortcomings of the RPI should be addressed by introducing CPIH data sources and methods into its production. The Authority and HM Treasury have launched a consultation on the Authority's proposal to address the shortcomings of the RPI. HM Treasury is consulting on the appropriate timing for the proposed changes to the RPI to take place. The Authority is consulting on how to make its proposed methodological changes to the RPI in a way that follows best statistical practice. The consultation was originally intended to run until 22 April 2020 but, because of the coronavirus (COVID-19) pandemic, the period has been extended to 21 August 2020. The Authority and HM Treasury have agreed that they cannot conclude a meaningful consultation with businesses and individuals focused on mitigating the challenges that this public health and economic emergency has created.

Alongside the consultation on the future of the RPI, we published proposed updates to our article on the three "use cases" for our consumer inflation measures in Measuring changing prices and costs for consumers and households, proposed updates: March 2020.

Coronavirus

In response to the coronavirus (COVID-19) pandemic, we are working to ensure that we continue to publish our consumer price statistics. In line with the current government guidelines, we are encouraging Office for National Statistics (ONS) staff to work from home and to avoid unnecessary travel and social contact. We have an established infrastructure, and these changes will not impact on our ability to produce our Consumer Prices Index including owner occupiers' housing costs (CPIH), Consumer Prices Index (CPI) and Retail Prices Index (RPI) statistics.

For June 2020, as in April and May, there were challenges around some of our collection activities, as approximately 80% of the price quotes (45% by weight) for the CPIH basket are usually physically collected in stores across 140 locations in the UK. The remainder are collected by ONS staff from online sources and administrative data provided by external suppliers.

In preparing to collect the prices for this publication, we identified 67 goods or services (accounting for 13.5% of the CPIH basket by weight) across the CPIH basket of goods and services that were unavailable to consumers. This is lower than the 74 unavailable items for May and 90 for April as government guidance on some services relaxed. The list of unavailable items in June, and the changes to the list from May, are shown in Table 58 in the Consumer price inflation dataset.

The Coronavirus and the effects on UK prices article describes the approach we have taken for imputing price movements for items that are currently unavailable to consumers to purchase. For unavailable items in the RPI, we have imputed price movements based on the all-available-items price movement of the RPI (annual or monthly, depending on whether the series is seasonal or not), and for the CPIH and CPI we have imputed price movements based on the all-available-items price movement of the CPI. It is necessary to use the CPI price movement for both, so that both indices are constructed from the same set of item indices.

Overall, the number of price quotes that are usually collected in store and that are used in constructing the June 2020 indices was 79.3% of the number of price quotes collected in February 2020 (excluding unavailable items). It is not unusual for the proportion of quotes to be below 100% as there are often prices that are either temporarily missing or where the price for a non-comparable replacement item is collected. For this reason, we have compared the coverage in the current month to the February index collected before the social distancing policies and movement restrictions came into effect.

The price quotes collected by ONS staff or from administrative data account for approximately 20% of the price quotes in our CPIH sample. Once all price quotes have been weighted together, the overall coverage for goods and services available in June 2020 was 84.0% of the comparable coverage collected in February 2020 (excluding unavailable items).

For June 2020, in addition to the 67 unavailable items in the CPIH basket, we identified a further 12 items where, although available in theory, the proportion of price quotes collected was below 20%. For some of these items, we based the price movement on the collected prices. However, for nine, mostly where price collection had proved impossible, we imputed their price movement. The categories, where the number of price quotes used in constructing the indices is less than half the number used in February, have been identified in relevant tables in the accompanying dataset, for example, in Table 3.

As the collection issues are likely to continue in subsequent months, we are continuing to monitor the resumption of services stopped during the lockdown period, and we will carefully consider how we will reintroduce items in the coming months. An article describing our approach to this will be published shortly.

We continue to engage with other national statistical institutes (NSIs) and international organisations to understand how they are responding to similar issues. Under Section 21 of the Statistics and Registration Services Act 2007, the Bank of England must make a determination on any changes to the coverage or basic calculation of the RPI that we propose, to establish whether such a change "constitutes a fundamental change in the index which would be materially detrimental to the interests of the holders of relevant index-linked gilts". We have shared our plan with the Bank of England, and they have determined that none of the planned temporary changes outlined "were both fundamental changes to the coverage or basic calculation of the RPI, and also materially detrimental to the holders of relevant index-linked gilts". The correspondence is available.

Coronavirus supplementary analysis

To further understand the impact of these measures, in our Consumer prices alternative basket analysis: June 2020 we explore different methods of dealing with unavailable goods and services in consumer price inflation measurement.

Eat Out to Help Out and reduction in VAT announcement

Following the Chancellor's announcement of the Eat Out to Help Out scheme to encourage people to return to eating out, we can confirm we will reflect this discount within the consumer price inflation measures for August 2020. We collect the price for a range of restaurant items, for example, a pub hot meal, restaurant main course or restaurant sweet course so, once confirming that the sampled restaurant or pub is participating in the scheme, we would intend to apply the discount to individual items.

In Section 9.2, Subsidies and discounts, of the Consumer Price Indices Technical Manual, 2019, we state that "discounted and subsidised prices are only recorded if available to anyone with no conditions of sale, otherwise the non-discounted or unsubsidised price is recorded". We want to ensure that the prices used in calculating consumer price indices are those actually paid by households. In this instance, the discount will be applied to all eligible items (meals and non-alcoholic beverages) available for consumption on the premises (that is, not takeaway food).

Having discussed the application of the discount at our Technical Advisory Panel for Consumer Price Statistics (APCP-T), we will be applying a reduced rate of discount to individual eligible items to reflect the fact the price is only discounted between Monday and Wednesday. We will provide further information on this in the next Consumer price inflation bulletin containing the July 2020 data.

Having reviewed the basket of goods and services, we have calculated that approximately 2.5% of the CPIH basket (which rises to 3.1% for the CPI) will have the discount applied.

We will also reflect any change in price resulting from the temporary Value Added Tax (VAT) reduction for food, non-alcoholic drinks, accommodation and attractions in the consumer price inflation measures. As this is an exceptional circumstance, we can advise that the temporary reduction in VAT will not come into effect until the August price collection.

CPIHY, CPIY and CPI-CT series

As a direct result of the challenges that we have encountered because of the coronavirus pandemic and our focus on ensuring that we continue to publish our consumer price statistics, we are postponing the publication of some supplementary series:

• the Consumer Prices Index including owner occupiers' housing costs excluding indirect taxes (CPIHY)

• the Consumer Prices Index excluding indirect taxes (CPIY)

• the Consumer Prices Index at constant tax rates (CPI-CT)

These series will next be published with the July dataset in August.

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

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. From April 2020 onwards, as a result of the coronavirus pandemic, we have collected all prices centrally by phone, email and from websites, and used imputation to produce series for some goods and services, as outlined in Coronavirus and the effects on UK prices.

The figures in this publication use data collected on or around 16 June 2020.

Consumer price indices, a brief guide gives an overview of consumer price statistics.

The Consumer Price Indices Technical Manual covers the concepts and methodologies underpinning the indices in more detail. The latest version was released on 18 September 2019.

Coronavirus and the effects on UK prices details our plans for data collection, compilation and publication of our various prices statistics following movement restrictions as a result of the coronavirus pandemic.

The 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: 2020 was released on 19 March 2020 and describes the latest update of the relative weights of items in the consumer price inflation basket to ensure they remain representative of current consumer spending patterns. A new source of information for some of the underlying low-level weights was also introduced with the February index. Impact of introducing a new data source for shop-type weights on consumer price indices, released on 12 February 2020, describes the change of source that has been made.

Consumer price inflation basket of goods and services: 2020, released on 16 March 2020, 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, 37KB) 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.

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. We have also published proposed updates to the article in Measuring changing prices and costs for consumers and households, proposed updates: March 2020. Specifically, 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 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.