Consumer price inflation, UK: December 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:
20 January 2021

Cyhoeddiad nesaf:
17 February 2021

1. Main points

  • The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 0.8% in December 2020, up from 0.6% in November.

  • The largest contribution to the CPIH 12-month inflation rate came from recreation and culture (0.35 percentage points).

  • Rising transport costs contributed 0.11 percentage points to the monthly change, while increasing prices for clothing, and recreation and culture items both contributed 0.10 percentage points to help increase inflation; these were partially offset by a downward contribution from falling food and non-alcoholic beverage prices.

  • On a monthly basis, the CPIH grew by 0.2% in December 2020, following a 0.1% fall in November.

  • As a result of restrictions caused by the coronavirus (COVID-19) pandemic easing in some areas in December 2020, the number of CPIH items identified as unavailable was nine, accounting for 2.0% of the basket by weight; this number had decreased from 72 in November; for the December collection (which took place on or around 15 December 2020), we collected a weighted total of 81.5% of comparable coverage collected before the first lockdown (excluding unavailable items).

  • The Consumer Prices Index (CPI) 12-month rate was 0.6% in December 2020, up from 0.3% in November; on a monthly basis, CPI grew by 0.3% in December 2020, following a 0.1% fall in November.

  • The Office for National Statistics (ONS) has released a public statement on the coronavirus (COVID-19) and the production of statistics; Section 8: Measuring the data describes the situation in relation to consumer price statistics.

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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 0.8% in December 2020, up from 0.6% in November 2020.

The Consumer Prices Index (CPI) 12-month inflation rate was 0.6% in December 2020, up from 0.3% in November 2020.

The CPIH and CPI rose by 0.2% and 0.3%, respectively, between November and December 2020, compared with there being no change to either CPIH or CPI between the same two months of 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.

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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.

There were notable increases to the contributions from four broad groups between November and December 2020. However, in December 2020, the downward contribution from food and non-alcoholic beverages also increased in size. There were further downward contributions to the CPIH 12-month inflation rate from clothing and footwear; and furniture, household equipment and maintenance.

Over the last 10 years, the largest contribution to the annual CPIH inflation rate came 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. The contribution from this group increased between March and April 2020 (to stand at 0.31 percentage points). Prices for data-processing equipment, computer games, games consoles and children’s toys rose in April 2020 – unlike the March to April falls observed in recent years – partly as a result of the restrictions caused by the coronavirus (COVID-19) pandemic.

The contribution from recreation and culture has fluctuated since then, because of price movements for computer games and consoles both in 2020 and the equivalent months in 2019. Despite the contribution falling to 0.24 percentage points in November 2020, in December 2020, the contribution from recreation and culture rose to 0.35 percentage points to equal the same level in August 2020. This was the joint highest level since February 2019.

During the last two years, the contribution from transport has shown more variation than any other group, ranging from an upward contribution of 0.59 percentage points in November 2018 to a downward contribution of 0.20 percentage points in May 2020. The contribution from transport has been comparatively stable between September and November 2020, with the 12-month inflation rate for the group at or just above 1.0%. However, in December 2020, the 12-month inflation rate for the group rose to 1.9% (the highest rate since February 2020) and the contribution to the CPIH 12-month inflation rate rose by 0.11 percentage points, to stand at 0.23 percentage points.

Much of the movement over the two-year period comes from changes in the price of motor fuels, especially during the coronavirus pandemic, though contributions from air fares and second-hand cars have also changed noticeably over the period. In December 2020, the largest individual contribution to the 12-month rate was a downward contribution (of 0.20 percentage points) from motor fuels. Average petrol prices stood at 114.1 pence per litre, down from 124.6 pence per litre in December 2019. Similarly, diesel prices were 118.8 pence per litre in December this year, compared with 129.9 pence per litre in 2019. The upward contribution from transport services increased to 0.17 percentage points in December 2020, from 0.09 percentage points in November 2020.

The contribution from clothing and footwear to the headline rate has mostly been negative over the last two years. Within the year, prices normally follow a clear seasonal pattern, rising over the period from January to May, then falling between May and July as items are placed on sale in preparation for the arrival of autumn product ranges. Prices then tend to rise until further sales in December.

Throughout 2020, we have seen clothing and footwear prices follow a different pattern compared with previous years. We recorded increased discounting during March and April 2020, probably in response to the lockdown, then prices were relatively stable (compared with previous years) to August 2020. Between August and October 2020, prices broadly increased as usual, but this has been followed by a fall between October and November 2020.

In December 2020, clothing prices rose fractionally, where they tend to usually fall because of sales. This meant the downward contribution to the CPIH 12-month inflation rate from the clothing and footwear group reduced in size to 0.09 percentage points in December 2020, from 0.19 percentage points in November 2020.

The contribution to the CPIH 12-month inflation rate from food and non-alcoholic beverages has usually been positive over the last four years but data for December 2020 showed an increase to the size of the downward contribution. This resulted in the largest negative contribution from the group since November 2016 and reflects an overall price fall of 1.4% in the year to December 2020. The negative contributions came from a variety of product groups, with the largest coming from vegetables (including potatoes and tubers).

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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 November and December 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 0.11 percentage points) to the change in the CPIH 12-month inflation rate, between November and December 2020, came from transport. Much of the upward contribution (0.08 percentage points) came from transport services. Despite the travel restrictions in place in December, prices for air fares followed their usual seasonal pattern, with price increases between November and December 2020, albeit by more than between the same two months in 2019. In 2019, the timing of the price collection days in relation to Christmas may have been a factor in price increases being lower than previous years.

Air fares made an upward contribution of 0.03 percentage points and there were further upward contributions of 0.03 and 0.02 percentage points from sea and coach fares, respectively. For both air and sea fares, we are following the Foreign, Commonwealth and Development Office (FCDO) travel advice and have excluded journeys from the sample to destinations where all but essential travel was advised.

Overall, there was a further small upward contribution (of 0.02 percentage points) from operation of personal transport equipment. The large upward contribution (of 0.04 percentage points) from fuels and lubricants was partially offset by a small downward contribution (of 0.02 percentage points) from maintenance and repairs, where membership fees for some roadside recovery service providers were discounted.

Between November and December 2020, petrol prices rose by 1.5 pence per litre, to stand at 114.1 pence per litre, and diesel prices rose by 1.4 pence per litre, to stand at 118.8 pence per litre. In comparison, between November and December 2019, petrol and diesel prices fell by 0.9 and 0.4 pence per litre, to stand at 124.6 and 129.9 pence per litre, respectively.

Clothing and footwear prices overall rose slightly (by 0.1%) between November and December 2020, compared with a fall of 1.8% between the same two months in 2019. Prices usually fall between these two months but price movements across 2020 have been unusual compared with previous years and appear to have been affected by the impact of coronavirus (COVID-19).

The overall price rises in December 2020 follow increased discounting in November 2020, as Black Friday sales may have spread further across the month. Between November and December 2020, the proportion of clothing and footwear items reported as being discounted increased so we would have expected prices to have fallen overall in the month. However, there was also evidence of a greater proportion of recoveries, where prices returned to a higher price, which appears to have offset the small increase in the number of discounted items.

Within clothing and footwear, most of the upward contribution (0.09 percentage points) came from clothing, with women’s and men’s clothing contributing 0.05 and 0.04 percentage points, respectively. Footwear, and other clothing and clothing accessories also had smaller upward effects (each of 0.01 percentage points).

There was also a large upward contribution to the CPIH 12-month inflation rate (of 0.10 percentage points) from the recreation and culture grouping. Prices overall rose by 0.5% between November and December 2020, compared with a fall of 0.3% between the same two months in 2019. The largest upward contribution came from data processing equipment, where prices for computer software, PC peripherals and laptops were overall largely unchanged between November and December 2020, but fell between the same two months in 2019.

Other recreational items, gardens and pets overall made an upward contribution of 0.03 percentage points. Across this broad grouping, the largest upward contribution came from computer games downloads and there were further smaller upward contributions from computer game consoles, equipment for sport, and plants and flowers. These upward movements were partially offset by small downward contributions from pre-school activity toys and board games, where prices fell in the run up to Christmas.

There was a further small upward contribution from recreational and cultural services. The upward contributions in this division were partially offset by a small downward contribution from package holidays.

The final large upward contribution (of 0.05 percentage points) to change in the CPIH 12-month inflation rate came from alcohol and tobacco. The 2.2% average price rise between November and December 2020 for tobacco products reflected an increase in duty on such products, which came into effect from the 16 November 2020. The duty change was not reflected in the November indices because it came into effect after the November data were collected on or around 10 November 2020. Prices for tobacco products were unchanged between November and December 2019, which resulted in an upward contribution of 0.04 percentage points.

Housing and household services had a small upward contribution (of 0.02 percentage points) to the change in the CPIH 12-month inflation rate. Owner occupiers’ housing costs and liquid fuels prices both increased between November and December 2020 by more than between the same two months of 2019.

The largest, partially offsetting, downward contribution (of 0.07 percentage points) to the change in the CPIH 12-month inflation rate between November and December 2020 came from food and non-alcoholic beverages, with prices falling by 0.4% this year, compared with a rise of 0.6% between the same two months in 2019. The effect comprised small movements from a variety of product groups, with the largest coming from vegetables (0.03 percentage points) and meats (0.02 percentage points). The largest individual downward contributions in these groups came from cooked ham and cauliflowers. The December 2020 price collection was completed on or around 15 December 2020, so our price quotes were not influenced by the reported stock shortages in supermarkets as we approached the end of the year.

Between November and December 2020, prices for furniture, household equipment and maintenance overall rose by 0.9%, compared with a larger increase (of 1.4%) between November and December 2019. This resulted in a small downward contribution of 0.03 percentage points. There were small downward contributions from household appliances, fitting and repairs; household textiles; and glassware, tableware and household utensils. There were standout movements across the division, coming from plastic storage containers, electric kettles and leather settees. These downward movements were partially offset by a small upward contribution from carpets and other floor coverings, where prices rose this year by more than in 2019.

There was a further small downward contribution (of 0.02 percentage points) to the change in the CPIH 12-month inflation rate between November and December 2020 from restaurants and hotels. Prices, overall, were estimated to have fallen by 0.8% between November and December 2020, compared with a smaller fall of 0.5% between the same two months in 2019.

Within this group, there were diverse contributions coming from differing categories. There was a large downward effect (of 0.08 percentage points) coming from accommodation services (from overnight hotel accommodation). This was partially offset by an upward effect (of 0.06 percentage points) coming from catering services, which includes restaurants and cafes, and canteens.

The final small downward contribution (of 0.02 percentage points) came from the communication grouping. Overall, prices were unchanged between November and December 2020 but had risen by 0.8% between the same two months in 2019. The downward contribution came entirely from mobile phone charges.

The number of CPIH items that were unavailable to UK consumers in December 2020 reduced to nine from 72 in November 2020. In total, these unavailable items had a downward contribution of 0.01 percentage points to the change in the CPIH 12-month inflation rate. Most imputed items made no overall contribution to the change in the rate, with all of their contributions being less than 0.01 percentage points in magnitude.

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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.

In December 2020, the contribution of housing components to the CPIH 12-month inflation rate rose to 0.18 percentage points, an increase of 0.02 percentage points since November 2020. The contribution has been relatively low since April 2020 (in contrast with contributions in excess of 0.50 percentage points at the start of 2020) as a result of reduced contributions from electricity, gas, liquid fuels, water supply and sewerage collection. The small upward movement between the latest two months has been caused by a small increase in the contributions from owner occupiers’ housing costs and a small easing in the downward effect from liquid fuels, where there was a sizable increase in price between November and December 2020.

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 then a negative contribution between October and December 2019, before the price reductions in January 2019 unwound, leading to an upward contribution from January 2020.

The introduction of the April 2020 Ofgem price cap resulted in a further negative contribution as prices of electricity increased slightly by 0.2% and gas prices fell by 3.5% on the month, compared with larger electricity and gas price rises of 10.9% and 9.3% respectively in April 2019. The latest energy price cap (PDF, 354KB), introduced on 1 October 2020, saw another reduction in the contribution from gas and electricity, with prices falling by 12.3% and 3.2%, respectively, between September and October 2020. Prices fell by 8.7% for gas and 2.2% for electricity between the same two months in 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 there was 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.

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6. Consumer price inflation data

Consumer price inflation tables
Dataset | Released 20 January 2021
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 20 January 2021
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 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 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 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 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 subsequently launched a consultation on 11 March 2020 on the Authority’s proposal to address the shortcomings of the RPI. HM Treasury consulted on the appropriate timing for the proposed changes to the RPI to take place. The Authority consulted on how to make its proposed methodological changes to the RPI in a way that follows best statistical practice.

The response to the consultation was published on 25 November 2020, alongside the Spending Review. In summary, the Authority concluded that to make the change, it would follow the methodology outlined in the consultation document. In addition, it would discontinue the supplementary and lower level indices of the RPI when the proposals are implemented, providing users with guidance to assist moving away from RPI-related indices. The Chancellor decided that, to minimise the impact of the Authority’s proposal on the holders of index-linked gilts, he could not give his consent to implementing the changes before 2030 when the last of the relevant index-linked gilts matures.

Alongside the launch of 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.

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8. Measuring the data

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 enabling 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 affect our ability to produce our Consumer Prices Index including owner occupiers’ housing costs (CPIH), Consumer Prices Index (CPI) and Retail Prices Index (RPI) statistics.

In April to July 2020, 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 141 locations in the UK. However, in August 2020, our price collectors were able to resume full or partial in-store collections in 128 locations following the approach detailed in our Consumer price statistics: resuming a field-based price collection article. 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). Where we were unable to collect prices locally, prices continued to be collected over the internet and by phone and email.

The government introduced tougher national restrictions in England from 5 November 2020, the tiered system of COVID-19 protection levels was introduced in Scotland on 2 November 2020, the firebreak lockdown in Wales ended during the prices collection period but non-essential travel was still discouraged, and Northern Ireland’s circuit breaker lockdown was in force affecting various services. As a result of the various restrictions to travel and outlet opening in November 2020, we reverted to full central collection for all 141 UK locations using a combination of internet, email and phone.

For the collection in December 2020, there were a variety of restrictions in place across the UK. Restrictions vary according to countries within the UK and, for those countries operating a tier system, by location also. While some locations could be visited and prices collected physically in stores, the number that were in areas where restrictions were greater was sufficiently large to justify a consistent central approach to price collection.

The manner in which missing price movements are imputed depends on whether access to a good or service is available or unavailable according to the restrictions in place. However, the imputation scheme requires that availability is defined nationally in order for unavailable items to have a negligible impact on the all-items calculation. For more information, please see Coronavirus and the effects on UK prices.

We have therefore based the December 2020 list of unavailable items on England Tier 2 restrictions. According to the weights used on the CPIH sampling frame, this level of restrictions is associated with the greatest level of UK turnover. Although England Tier 3 restrictions also carry a significant (but smaller) weight, we favour areas where there are fewer restrictions, as items that are on the Tier 2 list but not on the Tier 3 list are still available for purchase in some areas of the UK. Moreover, Tier 2 and Tier 3 restrictions are reasonably varied across England, mitigating for any regional biases.

Items that are unavailable in England Tier 2, but which are available in England Tier 1 or in the devolved nations, carry a small weight in the overall CPIH basket because of small location weights and item weights. Including these movements would mean that the index would be inappropriately influenced by very low weight items.

We identified nine goods and services across the CPIH basket of goods and services that were unavailable to consumers in December 2020, accounting for 2.0% of the CPIH basket by weight. This is a substantial reduction from the 72 unavailable items for November 2020 and is in line with the eight unavailable items in October 2020. The list of unavailable items in December 2020, and the changes to the list from previous months, 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 CPIH and CPI are constructed from the same set of item indices.

It should be noted that following the publication of the Coronavirus and the effects on UK prices article, we changed the imputation methodology applied to four items from a non-seasonal to a seasonal method. We are sorry for any inconvenience caused by these changes not being reflected in Annex B of the article. The affected items are (in item number order):

  • NHS dental charges (520327)
  • admission to historic monuments (640211)
  • football admissions (640221)
  • part-time leisure classes (640228)

Overall, the number of price quotes that are usually collected in store and that are used in constructing the December 2020 indices was 74.7% 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 December 2020 with the February 2020 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 December 2020 was 81.5% of the comparable coverage collected before the first lockdown (excluding unavailable items).

For December 2020, in addition to the nine unavailable items in the CPIH basket, we identified four 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.

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 shared our plan with the Bank of England, and they determined that none of the 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

In November, we published the Effect of reweighting the consumer prices basket during the coronavirus (COVID-19) pandemic: April to September 2020, which contains experimental consumer price statistics for both CPIH and 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.

We are planning to publish a further article that updates the information to cover October to December in February 2021.

Annual updating of weights

The weights and sample (or basket) of items used to compile the consumer price indices are updated at the beginning of each year. For CPIH and CPI, the 2021 weights would normally be based on spending patterns for 2019 from the national accounts. Given the effect of the coronavirus on spending during 2020 and the problems with collecting prices for new items potentially under lockdown conditions, we have considered whether to change the procedures for 2021.

In line with European guidance, we have decided to update the weights and basket, and to adjust the weights where there has been a clear change in spending between 2019 and 2020. For RPI, the 2021 weights would normally be based on spending patterns for the 12 months ending June 2020 from our Living Costs and Food Survey. Since this includes a period when spending was affected by the coronavirus, we have decided to use the results from the survey without further adjustment for changed spending patterns. We will publish an article in February 2021 describing the procedures in more detail.

Consultation on changes to the Retail Prices Index

The UK Statistics Authority recently ran a joint consultation with HM Treasury on changes to the Retail Prices Index methodology. The response to the consultation was published on 25 November 2020, alongside the Spending Review. In summary, the Authority concluded that to make the change, it would follow the methodology outlined in the consultation document.

In addition, it would discontinue the supplementary and lower-level indices of the RPI when the proposals are implemented, providing users with guidance to assist moving away from RPI-related indices. The Chancellor decided that, to minimise the impact of the Authority’s proposal on the holders of index-linked gilts, he could not give his consent to implementing the changes before 2030 when the last of the relevant index-linked gilts matures.

End of EU Exit Transition period

As the transition period ends and the UK enters into a new Trade and Co-operation Agreement with the EU, the UK statistical system will continue to produce and publish our wide range of economic and social statistics and analysis. We are committed to continued alignment with the highest international statistical standards, enabling comparability both over time and internationally, and ensuring the general public, statistical users and decision-makers have the data they need to be informed.

As the shape of the UK’s future statistical relationship with the EU becomes clearer over the coming period, the ONS is making preparations to assume responsibilities that, as part of our membership of the EU and during the transition period, were delegated to the statistical office of the EU, Eurostat. This includes responsibilities relating to international comparability of economic statistics, deciding what international statistical guidance to apply in the UK context and to provide further scrutiny of our statistics and sector classification decisions.

In applying international statistical standards and best practice to UK economic statistics, we will draw on the technical advice of experts in the UK and internationally, and our work will be underpinned by the UK’s well-established and robust framework for independent official statistics, set out in the Statistics and Registration Service Act 2007. Further information on our proposals will be made available early this year.

Delivery to Eurostat

Following the end of the transition period, the ONS will cease to provide a monthly submission of consumer price inflation data to Eurostat. As part of this submission, we specifically produced the Consumer Price Index at constant taxes (CPI-CT) series. We are now considering stopping the production of the constant taxes series but before taking a final decision, we would welcome hearing about any ways in which the data are currently used.

Responses should be emailed to cpi@ons.gov.uk.

It would be our intention to cease the publication of the constant taxes series from the January 2021 Consumer price inflation publication (published on 17 February 2021). This will mean that we will no longer publish Table 32 and Table 33 of the Consumer price inflation dataset.

We will also cease to publish the Harmonised Index of Consumer Prices (HICP) international comparisons for EU countries currently presented in Table 52 and Table 53 of the Consumer price inflation dataset. The international comparisons will continue to be available on the Eurostat website and a link will be provided in place of the current table.

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 to July 2020, as a result of the coronavirus pandemic, we 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.

For the August 2020 index, price collectors were able to resume full in-store collections in 102 of the locations and partial collection in a further 26 out of the 141 locations used across the country. For the remaining locations, which were affected by local lockdowns and collection issues, prices continued to be collected centrally. Consumer price statistics: resuming a field-based price collection describes the principles used in resuming price collection across the country and discusses specific issues arising from the resumption.

In November 2020, the government in England introduced tougher national restrictions in England from 5 November, the tiered system of COVID-19 protection levels was introduced in Scotland on 2 November, the firebreak lockdown in Wales ended during the prices collection period but non-essential travel was still discouraged, and Northern Ireland’s circuit breaker lockdown was in force affecting various services. As a result of the various restrictions to travel and outlet opening in November 2020, we returned to full central collections for all 141 UK locations using a combination of internet, email and phone.

For the collection in December 2020, there were a variety of restrictions in place across the UK. Restrictions vary according to countries within the UK and, for those countries operating a tier system, by location also. While some locations could be visited and prices collected physically in stores, the number that were in areas where restrictions were greater was sufficiently large to justify a consistent central approach to price collection.

The figures in this publication use data collected on or around 15 December 2020.

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 latest version was released on 18 September 2019.

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 2020 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) explains 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.

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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 currently published and those 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 (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, 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 8:00 on release day): +44 (0) 800 011 3703