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CPIH, CPI and RPI

Updated October 17th, 2017

September 2017

The Consumer Prices Index (CPIH) for the 12-month period to September 2017 (including owner occupiers’ housing costs), increased to 2.8%, according to ONS figures - up from 2.7% in the previous month. Rising prices of food, transportation, and recreational goods were the main contributors to the increase between August and September. There was downward pressure on a range of goods and services which partly offset the overall upward pressure. The 'headline' CPI rate rose to 3%, the highest since March 2012.

The RPI, which is widely used as a cost of living index, remained steady on 3.9%. As previously noted, this is significant in that the RPI is widely used to upgrade tax allowances, pensions, state benefits, and student loans. For example, with the interest rate on UK student loans currently set at RPI plus 3%, the new loan rate would rise to 6.9% . The RPI is also used as a basis to calculate price increases in many sectors, including energy and transport prices. With average earnings currently rising at around 2%, the 3.9% increase in the RPI means that many employees will continue to face falling real incomes.

CPIh, CPI and RPI (2013 - 2017)

More: on inflation

The upward pressure on prices is now widely expected to lead to a rate rise. The Bank of England expects inflation to peak in October 2017, falling back towards it target thereafter. Much depends, of course, on how sterling performs in the face of continued Brexit uncertainty.

Bank of England Inflation Report (August 2017)

Video courtesy of Bank of England

Previous figures

August 2017

The Consumer Prices Index (CPIH) for the 12-month period to August 2017 (including owner occupiers’ housing costs), increased to 2.7%, according to ONS figures - up from 2.6% in the previous month. Rising prices of clothing, footwear and motor fuels were the main contributors to the increase between July and August. Over the year, rising household costs, Council Tax and electricity prices were the main contributors to consumer price inflation.

The RPI, which is widely used as a cost of living index, also rose - to 3.9%, up from 3.6% in July. As previously noted, this is significant in that the RPI is widely used to upgrade tax allowances, pensions, state benefits, and student loans. For example, with the interest rate on UK student loans currently set at RPI plus 3%, the new loan rate would rise to 6.9% . The RPI is also used as a basis to calculate price increases in many sectors, including energy and transport prices. With average earnings currently rising at around 2%, the 3.9% increase in the RPI means that many employees will continue to face falling real incomes.

July 2017

The Consumer Prices Index (CPIH), which includes owner occupiers’ housing costs, for the 12-month period to July 2017, remained unchanged, at 2.6%, according to ONS figures released on 14th August, 2017.

In contrast, the RPI, which is widely used as a cost of living index, rose to 3.6%, up from 3.5% in June. This is significant in that the RPI is widely used to upgrade tax allowances, pensions, state benefits, and student loans. For example, currently the interest rate on UK student is calculated as the RPI plus 3%. The RPI is also used as a basis to calculate price increases in many sectors, including energy and transport prices. With average earnings currently rising at just under 2%, the 3.6% increase in the RPI means that many employees will continue to face falling real incomes.

June 2017

The Consumer Prices Index (CPIH), which includes owner occupiers’ housing costs, for the 12-month period to June 2017, fell to 2.6% - down from 2.7% in the period to May, 2017 - according to ONS figures released on 18th July, 2017. This is the first fall in the inflation rate since April 2016.

Falling motor fuel prices, and several recreational and cultural goods and services also contributed to the fall. Rising prices of furniture and furnishings partly offet the impact of falling these falls. The RPI also fell, down to 3.5% from 3.7%.

May 2017

The Consumer Prices Index (CPIH), which includes owner occupiers’ housing costs, for the 12-month period to May 2017, rose to 2.7% - up from 2.6% - according to ONS figures released on 13th June 2017. This is the highest rate since April 2012. Rising prices of games, toys and hobby related goods, along with higher electricity and food prices contributed most to the rise. This CPI measure - which does not include housing costs, and which remains the official ‘national’ statistic relating to consumer inflation - rose to 2.9%, up from 2.7%. The RPI rose to 3.7%, up from 3.5%.

April 2017

The Consumer Prices Index (CPIH), which includes owner occupiers’ housing costs, for the 12-month period to April 2017, increased to 2.6% - up from 2.3% - according to ONS figures released on 16th May 2017. Along with February's figure, this is the highest rate since June 2013. Rising air fairs, clothing costs and electricity charges contributed most to the rise. This CPI measure - which does not include housing costs, and which remains the official ‘national’ statistic relating to consumer inflation - rose to 2.7%. The RPI rose to 3.5%, up from 3.2%.

March 2017

The Consumer Prices Index (CPIH), which includes owner occupiers’ housing costs, for the 12-month period to March 2017, remained at 2.3% according to ONS figures released on 11th April, 2017. Along with February's figure, this is the highest rate since September 2013. Rising food and and non-alcoholic beverage costs were offset by falling transport costs. The CPIH rate is the same rate as the basic CPI index, which does not include housing costs, and which remains the official ‘national’ statistic relating to consumer inflation. The RPI fell from 3.2% to 3.1% over the same period.

February 2017

The Consumer Prices Index (CPIH) for the 12-month period to February 2017, which includes owner occupiers’ housing costs, was 2.3% compared with 1.9% in January, according to ONS figures released today (March 21st 2017). This is the highest rate since September 2013 – reflecting rising transport and food costs. This is the same rate as the basic CPI index, which does not include housing costs, and which remains the official ‘national’ statistic relating to consumer inflation.

January 2017

The CPI for year to January 2017 rose to 1.8%, up from 1.6% in the year to December 2016, according to figures released by the ONS. This was the highest rate since July 2014 (at 1.6%). The main upward pressure on prices came, again, from motor fuels, as well as from food prices. The RPI for January was also up, at 2.6% (from 2.5%). This is further evidence that the fall in sterling since June 2016 is working its way into high street prices. Although still within the Bank of England's target range of 2%, CPI inflation is clearly on an upward trajectory, which increases the likelihood of a rate rise at some point in 2017.

December 2016

The CPI for year to December 2016 rose by 1.6%, compared with a 1.2% rise in the year to November, according to figures released by the ONS. This was the highest since July 2014 (also at 1.6%). The main upward pressure on prices came, again, from motor fuels, as well as from air fares and food.  The RPI for December was also up, at 2.5%. This is widely regarded as evidence that the fall in sterling following the referendum result in June is now working its way into high street prices.

November 2016

The CPI for year to November 2016 rose by 1.2%, compared with a 0.9% rise in the year to October, according to figures released by the ONS. This was the highest since October 2014 (at 1.3%). The main upward pressure on prices came, again, from motor fuels, as well as from clothing and recreational goods. Falls in air and sea fares partly offset these rises. The RPI for October stood at 2.0%.

October 2016

The CPI for year to October 2016 rose by 0.9%, compared with a 1% rise in the year to September, which was the highest for nearly two years, according to figures released by the ONS.

The main upward pressure on prices came from motor fuels, and furniture and furnishings. The upward pressure was partly offset by downward pressure on clothing and university tuition fees, and games and toys.

September 2016

The CPI for year to September 2016 rose by 1.0%, compared with a 0.6% rise in the year to August, and was the highest for nearly two years, according to figures released by the ONS.

The main upward pressure on prices came from clothing, hotel charges, and motor fuels. The upward pressure was partly offset by downward pressure on food prices and air fairs.

August 2016

The CPI rose by 0.6% in the year to August 2016, which was unchanged in the previous twelve months, to July 2016, according to figures released by the ONS. This remains well below the official 2% target.

The main contributors to the higher rate were rising food prices and air fares, and a smaller fall in the price of motor fuels than a year ago. Downward pressure came from falls in hotel accommodation, and smaller rises in  the prices of alcohol, and clothing and footwear than a year ago.

At 1.8%, the RPI fell from the July level, of 1.9%.

Any post-Brexit effect of the falling pound on retail prices is unlikely to be seen until later in the year, given lags in the pass-through from changes in the exchange rate to retail prices.

July 2016

The CPI rose by 0.6% in the year to July 2016, up from 0.5% in June. This is the highest rate since late 2014, although it still remains well below the 2% target, according to figures released by the ONS.

The main contributors to the higher rate were increases in motor fuels prices, alcoholic drinks and accommodation services.

The RPI also rose, to 1.9% in the year to July, up from 1.6%.

Any effect of the falling pound on retail prices is unlikely to be seen until later in the year, given lags in the pass-through from changes in the exchange rate to retail prices.

April 2016

The CPI rose by 0.3% in the year to April 2016, down from 0.5%. This is the first drop in the rate of inflation since September 2015, according to figures released by the ONS.

The main contributors to the lower rate were lower air fares and prices of clothing, vehicles and social housing rent.

March 2016

The CPI rose by 0.5% in the 12 months to March 2016, up 0.2% on the February figure, according to figures released by the ONS. Increases in air fares and clothing were largely to blame for the rise, although this was offset by falls in food prices.

December 2015

The CPI in the year to December 2015 increased by 0.2%, up from 0.1% in the year to November.

Downward pressure on prices came from lower alcohol and tobacco prices, which was cancelled out by upward pressure from increased transport costs and motor fuels and services.

Over the year, most downward pressure came from lower food and non-alcoholic beverages.

Contributions to CPI change (12 months to December 2015)

CPI contributions December 2015

The news that inflation is still hovering around zero percent, coupled with pessimistic expectations about about growth prospects in China, is a clear indication that an interest rate rise is unlikely in the medium term.

CPI inflation 1989 - 2016 (Quarterly)

September 2015

The CPI fell by 0.1% in the year to September 2015 compared with virtually no change over the previous 12-month period to August 2015.

The major contributors to the slight fall came from motoring costs, and the lower than usual rise in the prices of clothing and footwear.

Although UK inflation has been hovering close to zero for nearly a year, few observers fear a European-style deflation given the underlying strength of consumer demand buoyed up by rising earnings. Real wages have been growing consistently since August 2014, so any current deflationary pressure is from the supply-side of the economy, through lower food and fuel costs, rather than from weaker demand. The likelihood is that interest rates will remain on hold again – at least until something more significant appears.

April 2015

The UK’s CPI fell by 0.1% in the 12 months to April 2015, the first time that the CPI has been negative since its introduction in 1996, and the first recorded fall in the price level since 1960.

According to the ONS, the falling rate of inflation in recent months is due largely to falling prices for food and motor fuels. While the oil prices are now on the rise, prices at the pumps are still lower than a year ago, and pulling the rate of inflation down. Over the last few months decreases in oil prices and other commodity prices combined with increased competition between the major supermarkets have all contributed to the downward price-trend, with falling transport costs pushing the inflation figure into negative territory in April. Economists identify this type of deflation as ‘good’ deflation in that it is driven by beneficial factors, including falling fuel prices. If deflation is triggered by demand-side factors, such as falling household spending and rising unemployment, ‘bad’ deflation can set in and become embedded in the economy. However, for the time being, at least, the UK’s deflation is not a cause for concern, and it may well come to an end fairly quickly as the effects of falling prices for these key items drop out of the index.

February 2015

Latest figures released by the ONS show that the CPI remained unchanged, at 0.0%, in the year to February 2015, down from 0.3% in January 2015 - the lowest inflation rate since records began.  The main contributions to the slowdown came from recreational goods, including data processing equipment, books and games, and toys, food and furniture, and furnishings. The ONS reported that there were no large upward effects to offset these changes.

January 2015

Latest figures released by the ONS show that the CPI grew by 0.3% in the year to January 2015, down from 0.5% in December 2014. Falls in motor fuel and food prices were the main contributors to the lowest rate of inflation since modern records began.  The CPIH grew by 0.4% in the year to January 2015.

December 2014

Latest figures released by the ONS indicate that the CPI grew by just 0.5% in the year to December 2014 - down from 1.0% in November.

The main reason for the relatively dramatic fall was that gas and electricity price increases which occurred in December 2013 dropped out of the index. This downward effect was reinforced by the continued drop in fuel prices. The Governor of the Bank of England is now required to write a letter of explanation to the Chancellor, given that the CPI has dropped out of the lower acceptable level of 1% (based on the inflation target of 2% (+/- 1%).

The CPIH grew by 0.6% in the year.

The news certainly suggests that interest rates are unlikely to increase in the short term. It also prompts fears of deflation. If the CPI does drop into negative territory there is a possibility that consumers will postpone consumption in the expectation that prices will fall further. However, there seems little evidence at present that this will happen and the UK will not enter a Japanese-EU style deflationary episode. There is a limit to which oil prices will fall, and consumer confidence is buoyant with earners experiencing a real increase in their wages. Many of the goods that have dropped in price are relatively inelastically demanded (food and petrol for example) - hence it is very unlikely that consumption will be delayed at all. Money wages will 'go further' which is likely to boost spending and put the brakes on further price deflation once it approaches zero.

November 2014

CPI falls to 1%.

October 2014

CPI stands at 1.3%.

September 2014

The Consumer Prices Index (CPI) in the year to September 2014 grew by 1.2% - its lowest level for 5 years.

Fuel pricesThe main contributions to the inflation slowdown cam from lower fuel and transport costs, together with falls in the prices of recreational goods.  The CPIH also grew by 1.2% in the year to September 2014.

 

August 2014

The Consumer Prices Index (CPI) for the year to August grew by 1.5%, down from 1.6% in July. Falls in the prices of motor fuels and food & non-alcoholic drinks provided the largest downward contributions to the change in the rate. While clothing, transport and alcohol prices put upward pressure on the CPI, this was more than offset by downward pressure from fuels, food and non-alcoholic drinks. The CPIH also grew by 1.5% while the RPIJ grew by 1.8%.

July 2014

The Consumer Prices Index grew by 1.6% in the year to July - down from 1.9%. Downward pressure came from clothing,   alcohol, financial services and food, with transport the major contributor to upward pressure.  The CPIH grew by 1.5% and the RPIJ grew by 1.8%, down from 2.0% in June.

June 2014

The Consumer Prices Index (CPI) grew by 1.9% in the 12 months to June 2014, up from 1.5% in May. Increases in the prices of clothing, food, non-alcoholic drinks and air transport accounted for a significant proportion of the rise. The CPIH (which includes the costs of housing services associated with owning, maintaining and living in one’s own home) also grew - up to 1.8% in the year to June 2014, from 1.4% in May.

May 2014

The CPI grew by 1.5% in the 12 months to May 2014, down from 1.8% in April. The ONS reported that reductions in transport costs, especially air fares, provided the largest contribution to the decrease in the rate. Food and non-alcoholic drinks, and clothing also contributed to the reduction in inflation. The CPIH grew by 1.4% in the year to May 2014, down from 1.6% in April while the RPIJ grew by 1.7%.

April 2014

The annual rate of inflation increased from 1.6% in March to 1.8% in April 2014. This was largely due to increased transport costs including air and sea fares.  Were it not for a fall in food prices, the rate would have been higher. This is the first increase in the CPI since January 2103.


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