Consumer price inflation, UK: February 2020

• The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.7% in February 2020, down from 1.8% in January 2020.

• The largest contribution to the CPIH 12-month inflation rate in February 2020 came from housing, water, electricity, gas and other fuels (0.52 percentage points), which fell by 0.03 percentage points from January.

• The contributions to change in the CPIH 12-month inflation rate were relatively small compared with movements in most months.

• Falls in the price of motor fuels, and games, toys and hobbies resulted in the largest downward contributions to the change in the CPIH 12-month inflation rate between January and February 2020.

• Price rises for recording media, and for restaurant and hotel services produced the largest, partially offsetting, upward contributions to change.

• The Consumer Prices Index (CPI) 12-month rate was 1.7% in February 2020, down from 1.8% in January.

• The Office for National Statistics (ONS) has released a public statement on the coronavirus (COVID-19) and the production of statistics. Measuring the data describes the situation in relation to the Consumer price inflation, UK: February 2020 bulletin.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.7% in February 2020, down from 1.8% in January.

The CPIH 1-month inflation rate was 0.3% in February 2020, compared with 0.4% in February 2019.

The Consumer Prices Index (CPI) 12-month inflation rate was 1.7% in February 2020, down from 1.8% in January.

Given that the owner occupiers’ housing costs component accounts for around 16% of 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.

Since November 2018, the largest upward contribution to the CPIH inflation rate has come from housing and household services. In February 2020, it contributed 0.52 percentage points to the headline rate of 1.7%. Its contribution fell from May 2019 as a result of falling contributions from electricity, gas and other fuels. However, in January 2020, its contribution increased again to 0.55 percentage points and has stayed close to that level in February.

Restaurants and hotels also provided a large contribution to inflation in February 2020. Its contribution has risen since December 2019 principally as a result of changes in the price of accommodation services.

Over the last two years, the contribution from transport has shown more variation than from any other group, ranging from 0.75 percentage points in August 2018 to 0.07 percentage points in September 2019. Much of the movement comes from changes in the price of motor fuels though contributions from air fares and second-hand cars have also changed over the period. The contribution in February 2020 was 0.23 percentage points, little changed from January.

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 January and February 2020. The corresponding figures for the Consumer Prices Index (CPI) can be found in column F of Table 26 in the Consumer price inflation tables.

The contributions to change in the CPIH 12-month inflation rate at the broad group level were relatively small compared with movements in most months.

The largest downward contribution to change (of 0.03 percentage points) came from housing and household services, where overall prices were little changed between January and February 2020 but rose by 0.1% between the same two months a year ago. Within this category, there were small downward contributions from owner occupiers’ housing costs and liquid fuels.

A second small downward effect (again of 0.03 percentage points) came from alcohol and tobacco. This effect came principally from the prices of tobacco rising by less than a year ago.

Furniture, household equipment and maintenance produced a small downward contribution as prices of furniture and furnishings rose by less between January and February 2020 than between the same two months a year ago. Lounge furniture was the principal contributor to this decrease.

There was also a small downward contribution from food and non-alcoholic beverages, with prices rising by 0.2% between January and February 2020, compared with a rise of 0.4% between the same two months a year ago. Bread and cereals, and vegetables had the largest downward effects though these were partially offset by small upward contributions from oils and fats, and fruit.

The largest upward contribution to the change in the CPIH 12-month rate (of 0.04 percentage points) came from restaurants and hotels. Overall, prices for accommodation rose by 1.6% between January and February 2020, compared with a negligible movement between the same two months a year ago.

There was no significant contribution to change from transport overall but this masked larger changes, which offset each other within the broad category. Motor fuels had a large downward contribution of 0.05 percentage points, with petrol prices falling by 2.4 pence per litre between January and February 2020, compared with a smaller fall of 0.5 pence per litre between the same two months a year ago. Similarly, diesel prices fell by 3.2 pence per litre between January and February this year compared with a smaller fall of 0.2 pence per litre in 2019. This downward effect was offset by upward contributions coming from second-hand cars and sea transport, with prices in both categories rising by more in the month to February 2020 than in the month to February 2019.

Similarly, a very small downward effect from recreation and culture masked a large downward contribution from games, toys and hobbies, offset by upward contributions from recording media and cultural services. Within these categories, the largest downward contribution came from computer games while the largest upward contributions came from CDs and admissions to live music events.

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, it has stabilised since early 2018 and made the largest contribution to the CPIH 12-month inflation rate from all the housing and household services categories throughout most of 2019 and the first two months of 2020.

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. Ofgem lowered the price cap for the six-month period in effect from 1 October because of reductions in costs paid by suppliers, mainly wholesale energy costs. This meant that, from October 2019, the contribution to the CPIH 12-month inflation rate from electricity, gas and other fuels became negative. However, from January 2020, it provided an upward contribution as the gas and electricity price reductions in January 2019 unwound.

The increases in Council Tax that started in 2016 have meant that its contribution has risen over recent years, though there was little change in its contribution when the 2019 increases were introduced in April last year. Conversely, the reduction in the contribution from rents between 2016 and 2018 is likely to be a result of a policy to reduce social housing rent. The contribution from rent in total has risen slightly since early 2018. 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)

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)

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.

CPI is produced at the same level of detail as CPIH, in the accompanying dataset and time series.

Retail Prices Index (RPI)

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 time series section of the inflation and price indices area of our website.

The UK Statistics Authority recommended in 2019 that the publication of the RPI should be stopped at a point in the future and that in the interim, the shortcomings of the RPI should be addressed by introducing CPIH data sources and methods into its production. The Authority and HM Treasury have launched a consultation on the Authority’s proposal to address the shortcomings of the RPI. HM Treasury is consulting on the appropriate timing for the proposed changes to the RPI to take place. The Authority is consulting on how to make its proposed methodological changes to the RPI in a way that follows best statistical practice. The consultation will run until 22 April 2020.

Alongside the consultation on the future of the RPI we have published proposed updates to our article on the three “use cases” for our consumer inflation measures, in Measuring changing prices and costs for consumers and households, proposed updates: March 2020.

COVID-19

In response to the developing COVID-19 pandemic, we are working to ensure that we continue to publish our consumer price statistics - please see Office for National Statistics’ (ONS’) public statement about Covid-19. In line with the current government guidelines, we are encouraging ONS staff to work from home and to avoid unnecessary travel and social contact. We have an established infrastructure to help mitigate these changes to ensure we continue to produce the CPIH, CPI and RPI statistics. We will though continue to review our mitigation as events unfold.

There will inevitably be challenges around some of our collection activities; approximately 40% of the CPIH basket is physically collected in stores across 140 locations in the UK. The remainder is collected by ONS staff from online sources and admin data provided by external suppliers.

The price collections for our March and April publications, reference periods February and March respectively, have been undertaken and are largely unaffected by recent developments. However, with the ever-changing environment, we are anticipating collection issues in the future and are contingency planning for these. These plans include existing processes to adjust for missing prices (outlined in the Consumer Prices Indices Technical Manual, 2019) and using our price collectors to check prices in stores that are open over the telephone and online. Our collection of online prices is much less affected by the current challenges.

Our contingency planning includes engaging with other National Statistics Institutes to understand how they are responding to similar issues.

After EU withdrawal

As the UK leaves the EU, it is important that our statistics continue to be of high quality and are internationally comparable. During the transition period, those UK statistics that align with EU practice and rules will continue to do so in the same way as before 31 January 2020.

After the transition period, we will continue to produce our consumer price statistics in line with the UK Statistics Authority’s Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards.

These currently include the standard international Classification of Individual Consumption According to Purpose (COICOP) system, developed by the UN Statistical Division, and for the Consumer Prices Index (CPI), the rules underlying the construction of the Harmonised Index of Consumer Prices (HICP), developed by Eurostat in conjunction with EU member states and European Economic Area countries.

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 18 February 2020.

The Bank of England was granted exceptional pre-release access to an estimate of consumer price inflation data at 9:30am on Monday 23 March 2020 so that the data were available for the Monetary Policy Committee meeting held on that day. The letters requesting and agreeing to pre-release are available at Correspondence with the Bank of England about pre-release access.

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

The Consumer Prices Indices Technical Manual covers the concepts and methodologies underpinning the indices in more detail. The latest version was published on 18 September 2019.

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

Consumer price inflation, updating weights: 2020 was released on 19 March 2020 and describes the latest update of the relative weights of items in the consumer price inflation basket to ensure they remain representative of current consumer spending patterns. A new source of information for some of the underlying low-level weights was also introduced with the February index. Impact of introducing a new data source for shop-type weights on consumer price indices, published on 12 February 2020 describes the change of source that has been made.

Consumer price inflation basket of goods and services: 2020, released on 16 March 2020, 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, 37KB) gives an explanation of 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 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 Retail Price Index Jevons (RPIJ) series

Having reviewed the responses to the consultation on the use made of data on the formula effect in the Retail Prices Index, we have made the decision to cease the publication of these series from the February 2020 Consumer price inflation publication (published on 25 March 2020).

The RPI formula effect series (CDID: CRFT, CRFU and CRFV) were published as experimental series and were not the formula effect series, which are published as part of the reconciliation of CPIH with RPI and CPI with RPI in Table 5 of the consumer price inflation dataset. The series in Table 5 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. We have also published proposed updates to the article in Measuring changing prices and costs for consumers and households, proposed updates: March 2020. Specifically, 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 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.