Consumer price inflation, UK: October 2016

The Consumer Prices Index (CPI) rose by 0.9% in the year to October 2016, compared with a 1.0% rise in the year to September.

Although the rate was slightly lower than in September 2016, it remained higher than the rates otherwise seen since late 2014.

The main downward contributors to the change in the rate were prices for clothing and university tuition fees, which rose by less than they did a year ago, along with falling prices for certain games and toys, overnight hotel stays and non-alcoholic beverages.

These downward pressures were offset by rising prices for motor fuels, and by prices for furniture and furnishings, which fell by less than they did a year ago.

CPIH (not a National Statistic) rose by 1.2% in the year to October 2016, unchanged from September.

From January 2017 we are improving the way we publish economic statistics, with related data grouped together under new "theme" days. This will increase the coherence of our data releases and involve minor changes to the timing of certain publications. For more information see Changes to publication schedule for economic statistics.

Consumer price inflation is the rate at which the prices of goods and services bought by households rise or fall. It is estimated by using price indices. A way to understand this is to think of a very large shopping basket containing all the goods and services bought by households. Movements in price indices represent the changing cost of this basket. An infographic explains how consumer price inflation is calculated, and Consumer price indices – a brief guide gives an overview of the indices and their uses. Consumer price indices are published monthly.

A price index can be used to measure inflation in a number of ways. The most common is to look at how the index has changed over a year. This is calculated by comparing the price index for the latest month with the same month a year ago. This is known as the 12-month inflation rate. This bulletin measures inflation to October 2016, so the 12-month rate measures changes in prices between October 2015 and October 2016.

A range of measures of consumer price and other price inflation are published. A tale of many price indices summarises information on the different measures.

What is the CPI?

The Consumer Prices Index (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 also used for purposes such as uprating pensions, wages and benefits and can aid in the understanding of inflation on family budgets. For more information see Users and uses of consumer price inflation statistics.

Latest figure and long-term trend

The CPI 12-month rate (the amount prices change over a year) between October 2015 and October 2016 stood at 0.9%. This means that a basket of goods and services that cost £100.00 in October 2015 would have cost £100.90 in October 2016.

From November 2014, the rate began to fall, remaining at or around zero for much of 2015 before gradually picking up from the end of the year. Although the rate in October 2016 was slightly lower than in September 2016, it remained higher than the rates otherwise seen since late 2014. The largest downward pull on inflation in October 2016 and for 2016 to date comes from prices for food and non-alcoholic beverages. Transport prices provided a downward pressure during 2015 and early 2016 but have since become the largest upward pressure on inflation.

Additional analysis of the Producer Price Index (PPI) and Consumer Price Index (CPI): October 2016 also published today, presents further analysis of the October PPI and CPI headline statistics and previous trends with a particular focus on how movements in the sterling exchange rate may have influenced these data.

Figure 1 shows the contributions to the CPI 12-month rate in October 2016 compared with the contributions to the 12-month rate a year earlier.

Figure 2 shows the CPI 12-month rate for the last 10 years. Table 1 shows the CPI 1-month rate (the amount prices change between 2 consecutive months), 12-month rate and index values for the last year.

Consumer Prices Index (CPI): What are the main movements?

This section explains which goods and services had the biggest impact on the change to the 12-month rate between September and October 2016 and, where relevant, considers the longer-term inflationary trends for these goods and services.

The change in the CPI 12-month rate can be calculated by comparing the 12-month rates for 2 consecutive months. An alternative, and equally valid, approach is to calculate it by comparing the price change between the latest 2 months and the price change between the same 2 months a year ago. Explaining the contribution to change in the 12-month rate (2013) is a diagram explaining the calculation.

The CPI rose by 0.1% between September and October 2016. This was a slightly smaller increase than between the same two months a year earlier (although to 1 decimal place the increase was also 0.1%), leading to a fall in the CPI 12-month rate.

Between September and October 2016, the main upward contributions to change in the CPI 12-month rate came from the following groups:

Transport: The upward contribution to the change in the rate came largely from motor fuels, with prices rising by 2.3% between September and October 2016. Fuel prices tend to reflect movements in oil prices and part of the increase in oil prices in 2016 can be explained by depreciation of sterling against the US dollar. The impact of fuel prices on the change in the 12-month rate is also influenced by what happened in the same period last year, when prices fell by 0.9%. Additional analysis of the Producer Price Index (PPI) and Consumer Prices Index (CPI): Oct 2016 explains this in more detail.

Furniture, household equipment and maintenance: prices, overall, increased by 0.5% between September and October 2016, compared with a fall of 1.0% a year ago. This is the first October increase since the series began in 1997, although it follows a period of unusually low prices between June and September, when a relatively high proportion of items were on sale compared with recent years. Within this group, the main contribution to the change in the rate came from prices for furniture and furnishings, which fell by less than they did a year ago.

The main downward contributions to the change in the CPI 12-month rate between September and October 2016 came from the following groups.

Clothing and footwear: the downward effect came mainly from garments (in particular women’s outerwear), for which prices rose by 0.2% between September and October 2016, compared with a larger rise of 2.3% a year earlier. It is important to note that this followed a relatively large increase in prices in September 2016, which resulted in an upward contribution to the change in the rate of a similar magnitude to the downward effect seen in October.

Recreation and culture: prices, overall, increased by 0.2% between September and October 2016, compared with a larger increase of 0.8% a year ago. Certain games and toys were the main contributors to the decrease in the rate.

Education: charges, overall, rose by 2.0% between September and October this year compared with a larger rise of 3.6% between the same 2 months a year ago. The downward contribution came principally from UK and EU student tuition fees, where the impact from the rise in the cap for tuition fees (first introduced for new students in England in 2012) was smaller this year than in 2015. This was because nearly all students are already paying the higher rate of fees whereas last year the fees for fourth year courses rose to the higher rates. In addition there were more modest price increases for part-time and postgraduate fees compared with last year.

Restaurants and hotels: overall, prices fell by 0.1% between September and October 2016, having risen by 0.1% a year earlier. The downward effect was due to prices for an overnight hotel stay falling by more than they did a year ago. Prices for overnight hotel stays have been volatile in recent months.

Food and non-alcoholic beverages: Overall, this group made a small downward contribution to the rate. A more pronounced effect was seen for non-alcoholic beverages, with prices falling by 3.2% between September and October 2016, having been unchanged between the same 2 months a year ago. This fall followed an unusually large increase in prices in September 2016. This downward effect was partially offset by prices for food, which fell by less than they did a year ago.

Figure 3 shows the contributions to change from each part of the CPI basket of goods and services.

On 10 November 2016, the National Statistician published a statement, confirming the intention for CPIH to become our preferred measure of inflation from March 2017.

CPIH has been re-assessed to evaluate the extent to which it meets the professional standards set out in the Code of Practice for Official Statistics and the assessment report published on 3 March 2016. The report includes a number of requirements that need to be implemented for CPIH to regain its status as a National Statistic. The actions taken to address these requirements were reported to the UK Statistics Authority at the end of September 2016, and a range of articles were published on 28 October 2016 (see the News section in the Background notes for further details).

CPIH is a measure of UK consumer price inflation that includes owner occupiers’ housing costs (OOH). These are the costs of housing services associated with owning, maintaining and living in one’s own home. OOH does not include costs such as utility bills, minor repairs and maintenance, which are already included in the index. The CPIH compendium provides further information, including the rationale for the choice of methodology for measuring OOH, which is still extensively debated.

CPIH uses an approach called rental equivalence to measure OOH. Rental equivalence uses the rent paid for an equivalent house as a proxy for the costs faced by an owner-occupier. In other words, this answers the question “how much would I have to pay in rent to live in a home like mine?” for an owner-occupier. OOH does not seek to capture increases in house prices. Although this may be inconsistent with some users’ expectations of measures of OOH, the inclusion of an asset price and therefore capital gains would make the index less suitable as a measure of consumption. OOH currently accounts for 16.5% of the expenditure weight of CPIH. This compares with a weight of 19.5% in 2005.

Currently, the method of calculation, the population coverage, the basket of goods and services and the method of deriving the weights are the same as for the Consumer Prices Index (CPI), with the exception of OOH. A full description of how CPIH is compiled is given in the Consumer Price Indices Technical Manual and in various papers published on the prices guidance and methodology webpage.

In October 2016, the 12-month rate (the rate at which prices increased between October 2015 and October 2016) for CPIH stood at 1.2%, unchanged from September 2016. The difference between the CPI and CPIH annual rates in October 2016 was 0.3 percentage points, up from 0.2 percentage points in September. Owner occupiers’ housing costs increased by 0.4% between September and October 2016, compared with 0.2% between these months a year earlier. This meant that they had a positive impact on the change in the CPIH 12-month rate between the 2 months.

Figure 4 shows the CPIH and OOH component 12-month rates for the last 10 years. The CPI 12-month rate has been included for comparative purposes. Table 2 shows the CPIH and OOH component 1-month and 12-month rates and index values for the last year. More CPIH data are available in Tables 21 to 34 of the Consumer Price Inflation dataset.

In accordance with the Statistics and Registration Service Act 2007, the Retail Prices Index (RPI) and its derivatives have been assessed against the Code of Practice for Official Statistics and found not to meet the required standard for designation as National Statistics. The full assessment report can be found on the UK Statistics Authority website.

The RPI is a long-standing measure of UK inflation that has historically been used for a wide range of purposes such as the indexation of pensions, rents and index-linked gilts. For further information see Users and uses of consumer price inflation statistics (2013).

RPIJ is a variant of the RPI and is calculated using formulae that meet international standards. The rationale for creating RPIJ was to give users a better alternative to the RPI if their needs were for a measure of inflation based on the same population, classifications, weights, etc as the RPI. Currently, RPIJ also acts as an analytical series in that it allows users to see the impact of using the Jevons (which meets international standards) in place of the Carli formula (which does not meet international standards) in the RPI. The use of the different formulae at the elementary aggregate level is currently the only difference between these indices. Detailed goods and services indices are not produced for RPIJ.

In October 2016, the 12-month rate for RPIJ stood at 1.3%, unchanged from September.

The RPI 12-month rate for October 2016 stood at 2.0%, meaning that it was 0.7 percentage points higher than it would have been had it used formulae that meet international standards.

Figure 5 shows the RPI and RPIJ 12-month rates for the last 10 years. Over this period the RPIJ 12-month rate has been, on average, 0.6 percentage points lower than the RPI.

Table 3 shows the RPI and RPIJ 1-month and 12-month rates and index values for the last year.

If you would like to understand the causes of the difference between the CPI and RPI, please see Table 5 in the Consumer Price Inflation dataset.

Table 4 outlines where data for all consumer price inflation statistics can be found.

Understanding and accessing the data

The Consumer Price Inflation Quality and Methodology page provides a good starting point for understanding these statistics.

A full description of how consumer price indices are compiled is given in the Consumer Price Indices Technical Manual. This is supplemented by further information available from the prices guidance and methodology webpage.

The CPI Quality and Methodology Information document contains important information on:

• the strengths and limitations of the data and how it compares with related data
• users and uses of the data
• how the output was created
• the quality of the output including the accuracy of the data

The report was last updated in October 2013.

The mini Triennial Review of the Consumer Prices Index (CPI) and Retail Prices Index (RPI) Central Collection of Prices is available.

All consumer price inflation data (including Excel dataset, time series data and explorable datasets) can be found on the dataset page.

To help you further, very detailed data are available, including the individual price quotes (for locally collected items only) and item indices that underpin the consumer price inflation statistics. The item indices behind the measurement of owner occupiers’ housing costs are included for the first time in the first quarter 2016 data. Please note, the data that are published are at a level which means that no individual retailer or service provider will be able to be identified. Previously the data published covered January 1996 to March 2016. The data for April to June 2016 are also now available. These data are updated once a quarter with around a 2-month lag with the latest CPI publication. For example, the data will next be updated when the November CPI is published on 13 December 2016, at which point the detailed data published will be extended to September 2016.

Internationally, the CPI is known as the Harmonised Index of Consumer Prices (HICP). HICPs are calculated in each member state of the European Union (EU) according to rules specified in a series of European regulations developed by the European Commission (Eurostat) in conjunction with the EU member states. Eurostat released figures for the Harmonised Index of Consumer Prices (HICP) for the month of October 2016 for EU member states, together with an EU average, on 17 November 2016. A summary of the latest European data is available from Eurostat’s database tables. Further information on HICP for the EU, Euro area and other EU member states is available from Eurostat's HICP web page.

Methods – CPI and other measures of inflation

The CPI, CPIH, RPIJ and RPI are compiled using the same underlying price data, based on a large and representative selection of around 700 individual goods and services for which price movements are measured in around 140 randomly selected areas throughout the UK. Around 180,000 separate price quotations are used every month to compile the indices. The outlets in which the prices are collected are selected randomly. Expenditure weights are held constant for 1 year at a time.

The selection of goods and services that are priced to compile these indices is reviewed annually. The contents of the 2016 basket are described in an article Consumer Price Inflation: The 2016 Basket of Goods and Services. The expenditure weights used to compile the indices are also updated each year. Additional details of the updated weights for 2016 are available in an article published on 22 March 2016 entitled Consumer Price Inflation: 2016 Weights.

Rates of change for the CPI and CPIH are calculated from unrounded index levels, rather than from the published indices which are rounded to 1 decimal place. The use of unrounded indices increases the accuracy of the calculation. The unrounded index levels for the CPI and CPIH are available from Tables 63 and 64 of the Consumer Price Inflation dataset. By contrast, rates of change for the RPI and RPIJ are calculated from the published rounded indices.

Further information on the methods used to construct the CPI, CPIH, RPI and RPIJ, including differences in the methods used for each index, can be found in the Consumer Price Indices Technical Manual. Users and uses of consumer price inflation statistics provides further details of how consumer price statistics are used more generally.