Consumer price inflation, UK: December 2019

• The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.4% in December 2019, down from 1.5% in November 2019.

• The largest contribution to the CPIH 12-month inflation rate in December 2019 came from housing, water, electricity, gas and other fuels (+0.36 percentage points).

• The largest downward contributions to the change in the CPIH 12-month inflation rate between November and December 2019 came from accommodation services and clothing.

• The Consumer Prices Index (CPI) 12-month rate was 1.3% in December 2019, down from 1.5% in November 2019.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.4% in December 2019, down from 1.5% in November 2019.

The CPIH one-month inflation rate was unchanged between November and December 2019, compared with a 0.1% rise between November and December 2018.

The Consumer Prices Index (CPI) 12-month inflation rate was 1.3% in December 2019, down from 1.5% in November 2019.

Given that the owner occupiers’ housing costs (OOH) component accounts for around 17% of the CPIH, it is the main driver for differences between the CPIH and CPI inflation rates.

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.

In December 2019, the largest upward contribution to the CPIH 12-month inflation rate came from housing and household services. The division has provided the largest upward contribution since November 2018. However, its contribution fell continuously from May 2019 to October 2019 as a result of falling contributions from electricity, gas and other fuels. Following a slight rise in November, its contribution remained unchanged in December 2019, at 0.36 percentage points.

The contribution to the CPIH 12-month inflation rate from restaurants and hotels fell to 0.16 percentage points in December 2019, from 0.24 percentage points in November. Restaurant and hotel prices overall rose in the year to December 2019 by 1.6%, but this was compared with a larger increase of 3.1% in the year to December 2018, with most of this reduction to the contribution coming from overnight hotel accommodation.

Transport’s once large upward contribution to the CPIH 12-month inflation rate fell continuously from April to September 2019, resulting in a September contribution about one-eighth the size that was seen in April. This was caused by falling contributions from motor fuels and transport services. In December 2019, the contribution was 0.08 percentage points, which has only been lower once since August 2016, at 0.07 percentage points in September 2019.

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 2019. The corresponding figures for the Consumer Prices Index (CPI) can be found in column F of Table 26 in the Consumer price inflation tables dataset.

The largest downward contribution to change in the CPIH 12-month inflation rate came from restaurants and hotels (0.08 percentage points). Overall, prices for overnight hotel accommodation fell by 7.5% between November and December 2019, compared with a rise of 0.9% between November and December 2018.

A second large downward contribution to change in the CPIH 12-month inflation rate (of 0.04 percentage points) came from clothing and footwear, with the main effect coming from women’s clothing. Within this group, the largest individual downward contributions came from women’s casual jackets and cardigans, where prices fell between November and December 2019 but rose between the same two months in 2018. There were also small individual downward contributions from formal trousers and formal skirts. There is evidence of increased discounting, with the proportion of women’s clothing items recorded on sale being higher in December 2019 than in December 2018.

There was a small downward contribution of 0.03 percentage points from food and non-alcoholic beverages, where prices overall rose between November and December 2019 but by less than a year ago. There were downward contributions from bread and cereals, and margarine or low-fat spread, where prices rose between November and December 2019 but by less than between the same two months in 2018. Sugar, jam, syrups, chocolate and confectionery (where prices fell by 2.1% in 2019, compared with a fall of 0.1% in 2018) also had a small downward contribution. These were partially offset by upward contributions from vegetables (including potatoes and tubers) and fruit.

Offsetting contributions meant that overall, transport had a small downward contribution (of 0.02 percentage points) to change in the 12-month CPIH inflation rate. A large downward contribution (of 0.10 percentage points) from transport services came predominantly from airfares, where prices rose between November and December 2019 but by less than between the same two months in 2018. The timing of the price collection days in relation to Christmas may have been a factor. There was also a smaller downward contribution from the purchase of vehicles where prices overall were little changed in 2019 but increased by 0.7% in 2018. These were partially offset by a large upward movement (of 0.10 percentage points) from fuels and lubricants, where prices fell between November and December 2019 but by less than between the same two months of 2018. Petrol prices fell by 0.9 pence per litre between November and December 2019, to stand at 124.6 pence per litre, while diesel prices fell to 129.9 pence per litre; this is a fall of 0.4 pence per litre. In 2018, petrol and diesel prices fell by 6.4 and 4.6 pence per litre, respectively, between the same two months to stand at 121.7 and 131.9 pence per litre, respectively.

There were small partially offsetting upward contributions from furniture and furnishings, major appliances and small electrical goods, and mobile phone charges, which all increased between November and December 2019 by more than between the same two months in 2018.

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. The contribution from OOH had been on a downward trend from a high in October 2016. However, OOH have stabilised since early 2018 and made the largest contribution to the CPIH 12-month inflation rate from all the housing and household services categories for most months in 2019, including December.

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. From October 2019 onwards, the contribution to the CPIH 12-month inflation rate from electricity, gas and other fuels has been negative. Ofgem lowered the price cap for the six-month period in effect from 1 October because of recent reductions in costs paid by suppliers, mainly wholesale energy costs. This was reflected in the 4.4% fall in average prices for electricity, gas and other fuels in total between September and October 2019.

Increases in Council Tax starting in 2016 mean that its contribution has risen over recent years, though there was little change in the contribution when the 2019 increases were introduced in April this year. Conversely, the reduction in the contribution from rents is likely to be a result of a policy to reduce social housing rent starting from April 2016, although the contribution has risen slightly over the last year. 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.

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 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 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 and an at-a-glance comparison with other measures, please see the time series section of the inflation and price indices area of our website.

The consumer price indices are based on prices collected from outlets around the country, supplemented by information collected centrally over the internet and by phone.

The figures in this publication use data collected on or around 10 December 2019.

Consumer price indices, a brief guide gives an overview of consumer price statistics.

The Consumer Price Indices Technical Manual covers the concepts and methodologies underpinning the indices in more detail. The manual has been updated and a new version published on 18 September 2019.

The Consumer Prices Index including owner occupiers' housing costs (CPIH) Compendium provides a comprehensive source of information on 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 Quality and Methodology Information (QMI) report.

Consumer price inflation, updating weights: 2019 provides an overview of the latest annual update of the relative weights of items used in compiling the UK consumer price inflation indices.

Consumer price inflation basket of goods and services: 2019 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, 38KB) 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: July 2018 update 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.

Use of the Retail Prices Index Jevons (RPIJ) series

There is currently a consultation on the use made of data on the formula effect in the Retail Prices Index: Table 35 of the consumer price inflation dataset.

Table 35 of the consumer price inflation dataset illustrates the effect of using the Jevons formula instead of the Carli formula in compiling the Retail Prices Index (RPI). The table was first published in March 2017 and shows the effect on the index, the 12-month rate and the one-month rate. The same data are also published as part of the consumer price inflation time series dataset with series identifiers CRFT, CRFU and CRFV. We are now considering stopping publication of these three series but before taking a final decision, we would welcome hearing about any ways in which the data are currently used. In short:

• How is the formula effect published in Table 35 of the consumer price inflation tables used?
• Would it cause you significant problems if we were to discontinue publishing the three series?

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

These are not the formula effect series, which are published as part of the reconciliation of the CPIH with the RPI and the CPI with the RPI in Table 5 of the consumer price inflation dataset. Those series will continue to be published.

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 that we currently publish and those that are under development. Specifically, they 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 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 Retail Prices Index as a measure of inflation, released on 8 March 2018, describes the issues with the RPI.