Consumer price inflation, UK: October 2021

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

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Cyswllt:
Email Chris Payne

Dyddiad y datganiad:
17 November 2021

Cyhoeddiad nesaf:
15 December 2021

1. Main points

  • The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.8% in the 12 months to October 2021, up from 2.9% in the 12 months to September.

  • The largest upward contribution to the October 2021 CPIH 12-month inflation rate came from housing and household services (1.23 percentage points), with further large upward contributions from transport (1.08 percentage points) and restaurants and hotels (0.43 percentage points).

  • CPIH increased by 0.9% on the month in October 2021, compared with no change in October 2020.

  • Housing and household services made the largest upward contribution to the change in the CPIH 12-month inflation rate between September and October 2021, with further large upward contributions to change from several divisions, including transport, restaurants and hotels, education, furniture and household goods, and food and non-alcoholic beverages.

  • The Consumer Prices Index (CPI) rose by 4.2% in the 12 months to October 2021, up from 3.1% in September.

  • On a monthly basis, CPI increased by 1.1% in October 2021, compared with no change in October 2020.

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2. Annual CPIH inflation rate

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.8% in the 12 months to October 2021, up from 2.9% in the 12 months to September. This is the highest 12-month inflation rate since November 2011, when CPIH was 4.1%.

Annual inflation rates at this time are influenced by the effects of the coronavirus (COVID-19) lockdowns in 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.

The Consumer Prices Index (CPI) rose by 4.2% in the 12 months to October 2021, up from 3.1% in the 12 months to September. This is the highest 12-month inflation rate since November 2011, when the CPI annual inflation rate was 4.8%.

On a monthly basis, CPIH rose by 0.9% in October 2021, compared with no change in the same month a year ago. Price rises in education, transport, clothing and footwear, housing and household services, and restaurants and hotels were the largest contributors to the monthly rate. More information on contributions to change is provided in Section 4.

In October 2021, the CPI rose by 1.1% from the previous month, compared with no change in the same month the previous year.

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.

More about economy, business and jobs

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3. Contributions to the annual CPIH 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.

Housing and household services

The contribution from housing and household services increased from 0.69 percentage points in September 2021 to 1.23 percentage points in October, the largest contribution from this division since November 2011. The main upward pressure came from electricity, gas and other fuels, which contributed 0.59 percentage points to the CPIH 12-month inflation rate.

The price rises follow the increase in the cap on energy prices, which changed on 1 October 2021. The Office of Gas and Electricity Markets (Ofgem) introduced energy price caps to limit the price energy suppliers can charge the estimated 15 million households that use a prepayment meter, or that are on the “standard variable” energy (or default) tariff. As the energy regulator, Ofgem update the energy price caps twice a year, in April and October, to ensure that they reflect changes in the cost of supplying energy.

On 6 August 2021, Ofgem published the cap levels for the period from 1 October 2021 to 31 March 2022. They reported that the price cap had increased by 12% since April 2021 because of “a rise of over 50% in energy costs over the last six months with gas prices hitting a record high as the world emerges from lockdown.”

In April 2020, the energy price cap had been reduced causing electricity, gas and other fuels’ contribution to the CPIH headline rate to fall to negative 0.20 percentage points. But this fall was reversed in April 2021 with rises in gas and electricity prices. The further price rises in October 2021 have compounded the April 2021 increases, resulting in 12-month inflation rates of 18.8% for electricity and 28.1% for gas. These are the highest annual rates for these classes since early 2009.

Elsewhere within housing and household services, owner occupiers’ housing costs rose by 1.9% on the year to October 2021, resulting in a contribution of 0.35 percentage points to the CPIH annual inflation rate. There were also notable upward contributions of 0.13 percentage points from both actual rents, and Council Tax and rates.

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 1.08 percentage points in October 2021. Transport provided the largest upward contribution from any division between May and September 2021 and, although October’s contribution from transport is larger still (having last been higher in September 2011, when it was 1.13 percentage points), housing and household services made a greater contribution to the annual inflation rate.

Within transport, the movements have mainly been caused 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 0.44 percentage points in October 2021.

Average petrol prices were 138.6 pence per litre in October 2021, compared with 113.2 pence per litre a year earlier. The October 2021 price is the highest recorded since September 2012. In comparison, in October 2020 some areas of the UK were subject to movement restrictions and, towards the end of the month, the Welsh Government implemented a “firebreak lockdown”. In the same month, the recovery in petrol prices seen between June and September 2020 stalled as the average price per litre fell by 0.1 pence.

The contribution from second-hand cars has also changed significantly since the beginning of 2020, rising from a downward movement of 0.07 percentage points in January 2020 to an upward pull of 0.15 percentage points in October 2020. 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. It then rose again to 0.27 percentage points in October 2021, which is equal to the February 2010 contribution, the largest contribution from second-hand cars since the start of the National Statistic series in January 2006.

Used car prices increased by 4.6% on the month to October 2021, leading to a cumulative increase of 27.4% since April 2021. By comparison, in 2020, used car prices grew by 1.4% on the month to October, and by 3.9% between April and October. It should also be noted, however, that April 2021 prices were lower than in April 2020, relative to January (Figure 3).

These latest movements come amidst reports of increased demand as dealers opened following the most recent 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 recent Prices economic analysis compares the growth in second-hand car prices in the UK with the euro area and United States.

There was also a large upward contribution of 0.09 percentage points from passenger transport by air. This reflects a 12-month inflation rate for air fares of 16.2%. Over the course of the pandemic, air travel has periodically been unavailable to consumers. This included the period from April to June, and November 2020, as well as January to June 2021. Although in both October 2020 and October 2021 air fares were available, there were some differences in price collection, reflecting differences in travel restrictions and the legality of travelling abroad, that should be taken into consideration. More detail is provided in Section 4 of the August 2021 bulletin.

Restaurants and hotels

The contribution from restaurants and hotels rose to 0.43 percentage points in October 2021, although it remained below August’s contribution of 0.65 percentage points, which reflected widespread discounting under the government’s Eat Out to Help Out (EOHO) scheme in the previous year. This was the largest contribution that this division had ever made to the CPIH annual rate National Statistic series since January 2006.

The contribution breaks down into 0.14 percentage points from accommodation services, which increased by 13.3% on the year to October, and 0.29 percentage points from catering services. Prices within the catering services group grew by 4.9% on the year to October 2021. Much of the catering services basket was unavailable for periods of the coronavirus pandemic, because of movement restrictions. However, in October last year, catering services were largely available. At this time, some basket items would have been subject to a lower than usual rate of Value Added Tax (VAT) at 5%. As of 1 October 2021, this increased to 12.5% and – if outlets chose to pass on the saving to their customers – this could be underlying some of the growth in catering services.

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4. Contributions to change in the annual CPIH inflation rate

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 September and October 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.

The rise in the CPIH annual rate for October 2021 is driven by upward contributions to change of 0.03 percentage points or more from 7 of the 12 divisions. This was partially offset by small downward contributions to change from three of the divisions.

Housing and household services

The largest contribution to the change in the CPIH 12-month inflation rate comes from housing and household services, which increased the rate by 0.55 percentage points to October 2021. Prices increased by 1.2% on the month, compared with a fall of 0.5% in the same month a year ago. Of this, electricity, gas and other fuels contributed 0.50 percentage points to the change in the rate, with owner occupiers’ housing costs providing a further 0.03 percentage points of the change and 0.02 percentage points from actual rents.

The contribution to change from electricity, gas and other fuels was primarily because of rising electricity and gas prices, which increased by 8.7% and 17.1% respectively on the month. These compare with price falls of 3.2% and 12.3% respectively on the month a year ago. Within the same group, liquid fuels grew by 18.8% on the month, compared with a rise of 4.4% in the same month a year ago. However, given the comparatively lower weight associated with liquid fuels, they made a smaller contribution of 0.02 percentage points to the change in the CPIH 12-month inflation rate.

Transport

Transport made the next largest contribution to the change in the 12-month inflation rate, increasing it by 0.17 percentage points to October 2021. This was mainly because of motor fuels, where price rises of 3.0% on the month compared with falls of 0.1% a year ago increased the inflation rate in the 12 months to October by 0.08 percentage points. To a lesser extent there were contributions to change from transport services (0.05 percentage points), used cars (0.04 percentage points) and motorcycles and bicycles (0.01 percentage points). These movements were partially offset by negligible downward contributions to change elsewhere.

Within transport services, the contribution to change was split between passenger transport by air (0.02 percentage points), road (0.02 percentage points) and railway (0.01 percentage points) where prices rose on the month this year, but fell a year ago. Passenger transport by air showed the highest monthly increase of 5.5% against a fall of 0.4% a year ago.

Passenger transport by road and passenger transport by railway showed smaller monthly increases this year of 0.2% and 0.8% respectively. These compare against monthly price falls last year of 2.2% and 0.3% respectively. The greater weight associated with these classes means that their price movements make a greater contribution to the change in the inflation rate than passenger transport by air. A further factor is that the weight for passenger transport by air halved between 2020 and 2021, reflecting the reduced spending on air travel over the coronavirus (COVID-19) pandemic. This means that less weight is given to this year’s monthly price rise.

The CPIH weights for 2021 were adjusted to reflect spending in the base year, which was heavily influenced by the coronavirus pandemic. This is because the CPIH follows the price development of a fixed basket of goods and services. The annual inflation rate, therefore, is consistent with the idea of showing the expected change in price of a fixed basket purchased one year earlier. More information on the calculation of weights for CPIH in 2021 can be found in the article, Coronavirus (COVID-19) and Consumer Price Inflation weights and prices: 2021.

Restaurants and hotels

Restaurants and hotels increased the CPIH 12-month inflation rate by 0.09 percentage points between September and October 2021. Of this, 0.05 percentage points came from the catering services group where prices rose by 1.3% on the month compared with a rise of 0.3% on the month a year ago. This is a result of very small contributions to change accumulating across the catering services basket.

In August 2020, alongside the temporary Eat Out to Help Out (EOHO) scheme, the government introduced a reduction in Value Added Tax (VAT) from 20% to 5% for the hospitality sector. Although the EOHO scheme ended on 31 August, the reduced VAT rate was in operation until 30 September 2021.

From 1 October, VAT was increased for the hospitality sector to 12.5% until 31 March 2022, when it will return to 20%. It is possible that some of the price rises in this group reflect outlets that had passed on the VAT saving to their customers and have had to subsequently increase prices to accommodate the October increase in VAT.

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.

Restrictions began easing from 12 April 2021 and, since August 2021, there are no items across the CPIH basket of goods and services that are unavailable to consumers. The changes to the list from previous months are shown in Table 58 in the Consumer price inflation dataset.

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5. Owner occupiers’ housing costs

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 is shown in Figure 5. In October 2021, the contribution of housing components to the CPIH 12-month inflation rate was 1.23 percentage points, an increase of 0.55 percentage points from September 2021.

OOH’s contribution to the CPIH annual inflation rate increased from 0.32 percentage points to 0.35 percentage points, increasing the rate to October 2021 by 0.03 percentage points. OOH increased by 0.3% on the month to October, compared with a smaller rise of 0.1% a year ago. The contribution from Council Tax remained at 0.13 percentage points, and therefore made no contribution to the change.

The large contribution from electricity, gas and other fuels in October 2021 makes this class the largest current contributor within housing and household services. Previously, in September, OOH was the largest contributor. It had been the largest upward contributor in the division since July 2019, when the contributions from this class and electricity, gas and other fuels were at similar levels. However, there were downward contributions on a similar scale from electricity, gas and other fuels over much of 2020, reflecting reductions in the energy price cap at the time.

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6. Consumer price inflation data

Consumer price inflation tables
Dataset | Released 17 November 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 17 November 2021
Comprehensive database of time series covering measures of inflation data for the UK including the CPIH, CPI and RPI.

Consumer price inflation detailed briefing note
Dataset | Released 17 November 2021
Background briefing to the statistical bulletin.

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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 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.

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8. Measuring the data

Making our published spreadsheets accessible

We have published sample versions of a selection of consumer price inflation tables prepared following the GSS guidance on releasing statistics in spreadsheets. It is essential that we aim to improve the usability, accessibility and machine readability of our published statistics so that everyone can make use of them. We have published these one-off sample tables to help communicate the changes we will be making to the consumer price inflation tables over the coming months. When we change over to the new format, there will be a period where we will publish the tables in both the new and the current formats, along with a mapper to help users to find the information they require in the new format tables. If you have any questions or comments on these sample tables, please email cpi@ons.gov.uk.

Consultation on the Code of Practice for Statistics – proposed change to 9:30am release practice

On behalf of the UK Statistics Authority, the Office for Statistics Regulation (OSR) is conducting a consultation on the Code of Practice for Statistics, proposing changes to the 9:30am release practise. Please send comments by 21 December 2021 to: regulation@statistics.gov.uk.

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 October 2021, our price collectors were able to complete full collections in 102 of the locations, with partial collections in the other 39, 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 12 October 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.

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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 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.

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Manylion cyswllt ar gyfer y Bwletin ystadegol

Chris Payne
cpi@ons.gov.uk
Ffôn: Consumer price inflation enquiries: +44 1633 456900. Consumer price inflation recorded message (available after 8:00 on release day): +44 800 011 3703