Consumer prices indices technical guidance

Our consumer price indices measure changes in the prices of goods and services that households purchase.

In this article, we summarise a set of guidance articles that explain how we compile and publish consumer price inflation measures, and the ways our measures can be used. They describe the scope and coverage of our indices, how the price data are collected, the data processing steps we take, and the methods we use to compile indices.

These methodology articles should help analytical users understand our consumer price inflation statistics in greater detail. Please be aware that that the articles do not cover Producer Price Indices or House Price Indices.

These articles replace components of the previous Consumer Prices Indices Technical Manual, 2019.

We welcome feedback and would be happy to receive comments on this guidance at cpi@ons.gov.uk.

These methodology articles describe the procedures we use to produce measures of consumer price inflation and associated price statistics. Our articles cover the following notable price indices:

• Consumer Prices Index including owner occupiers’ housing costs (CPIH)
• Consumer Prices Index (CPI)
• Retail Prices Index (RPI)
• Household Costs Indices (HCI)

The CPIH is our most comprehensive measure of consumer price inflation and is the lead measure in our Consumer Price Inflation, UK bulletin. It was launched in early 2013 as 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.

The CPI is identical to CPIH but excludes OOH and council tax. It is a measure of consumer price inflation that is produced to international standards. First published in 1997 as the Harmonised Index of Consumer Prices (HICP), the CPI is the inflation measure that is currently used as the government’s target for inflation. Since October 2011, the CPI has been used for deflating consumer spending within the national accounts. The CPI is also used for purposes such as uprating pensions, wages and benefits, and it can aid in the understanding of how inflation affects family budgets.

The CPIH, CPI, and other associated indices are accredited official statistics and are produced to the high standards set out in the UK Statistics Authority’s (The Authority's) Code of Practice.

The RPI is the longest-standing measure of inflation in the UK, but is no longer designated as “accredited official statistics” (previously described as "national statistics”). The RPI is, therefore, considered a legacy measure. In accordance with the Statistics and Registration Service Act 2007, the RPI and its derivatives were assessed against the Code of Practice for Official Statistics in early 2013. They did not meet the required standard for designation as accredited official statistics. Its use has been strongly discouraged by the former National Statistician John Pullinger in an article outlining the shortcomings of the RPI. It is The Authority’s policy to address the shortcomings of the RPI in detail at the earliest practical time. The change we propose can legally and practically be made by the authority in February 2030.

RPI inflation is currently used to uprate indexed-linked gilts. Historically, the RPI has been used as the measure for the government’s inflation target and deflation in the national accounts. It has also been used to index various prices and incomes including tax allowances, state benefits and pensions.

The Household Costs Indices (HCIs) show how changing prices and costs affect different subgroups of the population. They differ from the CPIH and CPI, which show how the prices of goods and services consumed by all households in the UK change over time. The HCIs are intended to complement our lead measures of inflation CPIH and CPI by providing insight into the inflationary experience of different household subgroups.

In this section, we present detailed guidance on the methods that underpin our inflation measures. Our guidance is divided into smaller themed methodology articles, each covering a specific topic within inflation compilation and dissemination.

Our Scope and coverage of consumer prices indices methodology article provides a summary of what inflation measurement is and what it can be used for. It covers some important conceptual matters, such as how our inflation measures are structured, and how they can be considered as a basket of goods and services. This offers some preliminary knowledge of the concepts of inflation statistics before we discuss the technical steps we take to calculate them.

• Scope and coverage of consumer prices indices

To measure inflation, there are two stages: elementary aggregation and higher aggregation. Elementary aggregation involves collecting the prices and measuring the price change of a sample of products over time. We produce thousands of these aggregates, each representing the inflation rate for a different group of products, potentially within a specific region, and potentially for a specific group of retailers. 

The calculation of elementary aggregates relies on a wide range of input data sources. Our Quality assurance of administrative data used in consumer price inflation statistics methodology article provides guidance on what these data sources are, and our assessment of the quality of these data.

• Quality assurance of administrative data used in consumer price inflation statistics

We use different approaches to calculating elementary aggregate indices depending on the type of data we use, or bespoke measurement challenges associated with the products we are collecting prices for. The following methodology articles describe the data sources, data processing techniques (including our quality adjustment methods), and the index calculation methods we use for different areas of the basket.

• Traditional data aggregates in consumer prices
• Alternative data aggregates in consumer prices
• Rents and owner-occupier housing aggregates in consumer prices
• Special case aggregates in consumer prices

The second stage of inflation measurement is higher aggregation. Higher aggregation allows us to combine the various elementary aggregates, each covering a narrow sector of the economy, into inflation measures covering much broader sectors. This allows us to, for example, combine the transport-related elementary aggregates into a price index for “Transport” as a whole. It also allows us to calculate the headline rate of inflation which is widely reported in the media. Our Higher-level aggregation and weights in consumer prices methodology article explains this in more detail.

• Higher-level aggregation and weights in consumer prices

We have written most of the concepts described so far from the perspective of measuring the CPI and CPIH. A lot of the principles still apply when measuring the RPI, but there are some main areas of difference. Our Calculating the Retail Price Index methodology article outlines some of the differences to our methods when calculating the RPI.

• Calculating the Retail Price Index

In our How we publish our consumer price outputs methodology article, this includes both our headline measures of inflation and various supplementary outputs. We also outline the policies we adhere to in the publication process explaining what we publish.

• How we publish our consumer price outputs

There are currently two Advisory Panels on Consumer Prices (APCP): the APCP Technical Panel and the APCP Stakeholder Panel. The Technical Panel functions to provide independent technical advice to the Office for National Statistics (ONS), whereas the Stakeholder Panel provides guidance to ensure that the statistics continue to meet user needs. The panels are a vital source of feedback and advice to ensure that developments within the ONS meet best practice. The terms of reference, minutes and agenda documents for each of the panels can be found on the Technical APCP page and the Stakeholder APCP page on the National Archives website, respectively.

Historic boards that underpinned our inflation measures include the RPI Advisory Committee (1947 to1994) and the Consumer Prices Advisory Committee (2007 to 2013).

Alternative data

These are larger, automatically collected data sources. We have introduced several alternative data sources into the calculation of our consumer price indices since the early 2020s.

Aggregates

Aggregates (or “strata”) are classifications into which the raw data can be separated. The strata “region” and “shop type” within item are generally used for the Consumer Prices Index including owner occupiers' housing costs (CPIH), Consumer Prices Index (CPI), Retail Prices Index (RPI) and the Household Costs Indices (HCIs). The data within each stratum are combined, and the resulting indices for each of the strata are then combined using stratum weights.

Basket

A convenient way to understand the nature of consumer price inflation statistics is to envisage a very large shopping basket comprising all the different kinds of goods and services bought by a typical household. As the prices of individual items in this basket vary, the total cost of the basket will also vary – consumer price statistics measure the change from month to month in this total cost.

Elementary aggregates

The set of indices calculated at the very first stage of aggregation

Inflation rate

The percentage change of a price index between two points in time. We typically refer to the annual inflation rate (comparing the current month with the same month a year earlier), or the monthly inflation rate (comparing the current month with the previous month). This term is usually used to mean the all-items inflation rate.

Price quotes

The individual prices collected through traditional data collection for specific products or varieties that households buy.

Products

Products, or “varieties”, are the varieties of goods or services available within an item specification. For example, automatic washing machines with different specifications are produced by different firms, but they are all automatic washing machines.

Traditional data

Prices that are manually collected through traditional sources (in-store, online and by phone). This applies to most areas of the consumer prices basket.

Weight

A factor by which a component is multiplied to reflect the level of consumers’ expenditure on that component.