Consumer price inflation, UK: January 2017

• The Consumer Prices Index (CPI) rose by 1.8% in the year to January 2017, compared with a 1.6% rise in the year to December 2016.
• The rate in January 2017 was the highest since June 2014.
• The main contributors to the increase in the rate were rising prices for motor fuels and to a lesser extent food prices, which were unchanged between December 2016 and January 2017, having fallen a year ago.
• These upward pressures were partially offset by prices for clothing and footwear, which fell by more than they did a year ago.
• CPIH (not a National Statistic) rose by 2.0% in the year to January 2017, compared with a 1.7% rise in the year to December 2016.

From 21 March 2017, the Consumer Prices Index including owner occupiers’ housing costs (CPIH) will become our headline measure of inflation and the focus of the commentary in this statistical release. CPIH builds on the Consumer Prices Index (CPI) by including owner occupiers’ housing costs and Council Tax, both of which are important components of household expenditure. A statement by the National Statistician in November 2016 explains the rationale for this change.

The Consumer Prices Index (CPI) will continue to be produced to international standards and will be published at the same level of detail.

Following consultation and a statement by the National Statistician, certain RPI-related indices will be discontinued. The all-items RPI, its sub-components and RPIX will continue to be published. Clarification of publication arrangements for the Retail Prices Index and related indices provides further information.

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. A way to understand this is to think of a very large shopping basket containing all the goods and services bought by households. Movements in price indices represent the changing cost of this basket. An infographic explains how consumer price inflation is calculated, and Consumer price indices – a brief guide gives an overview of the indices and their uses. Consumer price indices are published monthly.

A price index can be used to measure inflation in a number of ways. The most common is to look at how the index has changed over a year. This is calculated by comparing the price index for the latest month with the same month a year ago. This is known as the 12-month inflation rate. This bulletin measures inflation to January 2017, so the 12-month rate measures changes in prices between January 2016 and January 2017.

A range of measures of consumer price and other price inflation are published. A tale of many price indices summarises information on the different measures.

What is the 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 also used for purposes such as uprating pensions, wages and benefits and can aid in the understanding of inflation on family budgets. For more information see Users and uses of consumer price inflation statistics.

Latest figure and long-term trend

The CPI 12-month rate (the amount prices change over a year) between January 2016 and January 2017 stood at 1.8%. This means that a basket of goods and services that cost £100.00 in January 2016 would have cost £101.80 in January 2017.

The January 2017 rate of 1.8% is an increase on the December 2016 figure and is the highest since June 2014 when it was 1.9%. At that time, the rate began to fall, subsequently remaining at or around zero for much of 2015 before gradually picking up from the end of the year and throughout 2016.

The strong downward pull on inflation seen in recent years for prices for food has lessened considerably over the last 4 months. The 12-month inflation rate for food stood at negative 0.4% in January 2017, the highest since June 2014. Transport prices continue to provide the strongest upward pressure.

Prices economic commentary: Feb 2017, also published today, presents further analysis of the latest CPI, Producer Price Index (PPI), House Price Index (HPI), construction output price indices (OPIs) and Index of Private Housing Rental Prices (IPHRP) results and emerging trends.

Figure 1 shows the contributions to the CPI 12-month rate in January 2017 compared with the contributions to the 12-month rate a year earlier.

Figure 2 shows the CPI 12-month rate for the last 10 years. Table 1 shows the CPI 1-month rate (the amount prices change between 2 consecutive months), 12-month rate and index values for the last year.

Consumer Prices Index (CPI): What are the main movements?

This section explains which goods and services had the biggest impact on the change to the 12-month rate between December 2016 and January 2017 and, where relevant, considers the longer-term inflationary trends for these goods and services.

The change in the CPI 12-month rate can be calculated by comparing the 12-month rates for 2 consecutive months. An alternative, and equally valid, approach is to calculate it by comparing the price change between the latest 2 months and the price change between the same 2 months a year ago. Explaining the contribution to change in the 12-month rate (2013) is a diagram explaining the calculation.

The CPI fell by 0.5% between December 2016 and January 2017, compared with a larger fall of 0.8% between the same 2 months a year earlier. This led to a rise in the CPI 12-month rate.

The main upward contributions to the change in the CPI 12-month rate between December 2016 and January 2017 came from the following groups:

Transport: prices, overall, fell by 0.6% between December 2016 and January 2017, compared with a larger fall of 2.5% a year ago. Within transport, the largest upward effect came from motor fuels, with prices rising by 3.4% between December 2016 and January 2017, having fallen by 2.6% a year earlier. This continues the trend of increasing fuel prices seen since early 2016, reflecting movements in oil prices. Transport services, notably transport by air, road and rail, also contributed to the increase in the rate, as collectively prices fell by less than they did a year ago.

Food and non-alcoholic beverages: the upward effect came from a wide range of food products, with prices for food overall being unchanged between December 2016 and January 2017, having fallen by 0.6% a year ago. Following a sustained period of deflation of food prices since mid-2014, during which the 12-month rate was often lower than negative 3.0%, the rate has increased for 4 consecutive months, reaching negative 0.4% in January 2017. This is the highest it has been since June 2014. Prices economic commentary: Feb 2017 presents further analysis.

The main downward contribution to the change in the CPI 12-month rate between December 2016 and January 2017 came from:

Clothing and footwear: the downward effect was due to prices for a wide range of items of clothing and footwear. Overall, prices fell by 4.2% between December 2016 and January 2017, compared with a smaller fall of 3.1% last year. Sales patterns may have contributed to this, as the proportion of items on sale increased by more between December 2016 and January 2017 than it did a year ago.

Figure 3 shows the contributions to change from each part of the CPI basket of goods and services.

The Consumer Price Inflation Quality and Methodology Information page is a good starting point for understanding the Consumer Prices Index including owner occupiers’ housing costs (CPIH) and how it relates to other measures of inflation.

CPIH has been reassessed to evaluate the extent to which it meets the professional standards set out in the Code of Practice for Official Statistics and the assessment report published on 3 March 2016. The report includes a number of requirements that need to be implemented for CPIH to regain its status as a National Statistic. The actions taken to address these requirements were reported to the UK Statistics Authority at the end of September 2016.

CPIH is 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. OOH does not include costs such as utility bills, minor repairs and maintenance, which are already included in the index. The CPIH compendium provides further information, including the rationale for the choice of methodology for measuring OOH, which is still extensively debated. We also publish data for alternative measures of OOH on a quarterly basis alongside the article Understanding the different approaches of measuring owner occupiers' housing costs.

CPIH uses an approach called rental equivalence to measure OOH. Rental equivalence uses the rent paid for an equivalent house as a proxy for the costs faced by an owner occupier. In other words, this answers the question “how much would I have to pay in rent to live in a home like mine?” for an owner occupier. OOH does not seek to capture increases in house prices. Although this may be inconsistent with some users’ expectations of measures of OOH, the inclusion of an asset price and therefore capital gains would make the index less suitable as a measure of consumption. OOH currently accounts for 17.8% of the expenditure weight of CPIH. This compares with a weight of 19.5% in 2005.

Currently, the method of calculation, the population coverage, the basket of goods and services and the method of deriving the weights are the same as for the Consumer Prices Index (CPI), with the exception of OOH. A full description of how CPIH is compiled is given in the Consumer Price Indices Technical Manual and the CPIH compendium.

In January 2017, the 12-month rate (the rate at which prices increased between January 2016 and January 2017) for CPIH stood at 2.0%, up from 1.7% in December 2016. The difference between the CPI and CPIH annual rates in January 2017 was 0.2 percentage points, up from 0.1 percentage points in December 2016.

Figure 4 shows the CPIH and OOH component 12-month rates for the last 10 years. The CPI 12-month rate has been included for comparative purposes. Table 2 shows the CPIH and OOH component 1-month and 12-month rates and index values for the last year. More CPIH data are available in Tables 21 to 34 of the Consumer Price Inflation dataset.

In accordance with the Statistics and Registration Service Act 2007, the Retail Prices Index (RPI) and its derivatives have been assessed against the Code of Practice for Official Statistics and found not to meet the required standard for designation as National Statistics. The full assessment report can be found on the UK Statistics Authority website.

The RPI is a long-standing measure of UK inflation that has historically been used for a wide range of purposes such as the indexation of pensions, rents and index-linked gilts. For further information see Users and uses of consumer price inflation statistics.

RPIJ is a variant of the RPI and is calculated using formulae that meet international standards. The rationale for creating RPIJ was to give users a better alternative to the RPI if their needs were for a measure of inflation based on the same population, classifications, weights, etc as the RPI. Currently, RPIJ also acts as an analytical series in that it allows users to see the impact of using the Jevons (which meets international standards) in place of the Carli formula (which does not meet international standards) in the RPI. The use of the different formulae at the elementary aggregate level is currently the only difference between these indices. Detailed goods and services indices are not produced for RPIJ.

In January 2017, the 12-month rate for RPIJ stood at 1.8%, unchanged from December 2016.

The RPI 12-month rate for January 2017 stood at 2.6%, meaning that it was 0.8 percentage points higher than it would have been had it used formulae that meet international standards.

Figure 5 shows the RPI and RPIJ 12-month rates for the last 10 years. Over this period the RPIJ 12-month rate has been, on average, 0.6 percentage points lower than the RPI.

Table 3 shows the RPI and RPIJ 1-month and 12-month rates and index values for the last year.

If you would like to understand the causes of the difference between the CPI and RPI, please see Table 5 in the Consumer Price Inflation dataset.

Table 4 outlines where data for all consumer price inflation statistics can be found.

Understanding and accessing the data

The Consumer Price Inflation Quality and Methodology Information page, updated this month, provides a good starting point for understanding these statistics. It contains important information on:

• the strengths and limitations of the data and how it compares with related data
• uses and users of the data
• how the output was created
• the quality of the output including the accuracy of the data

A full description of how consumer price indices are compiled is given in the Consumer Price Indices Technical Manual. This is supplemented by further information available from the prices guidance and methodology page.

The mini Triennial Review of the Consumer Prices Index (CPI) and Retail Prices Index (RPI) Central Collection of Prices is available.

All consumer price inflation data (including Excel dataset, time series data and explorable datasets) can be found on the dataset page.

To help you further, very detailed data are published monthly, including the individual price quotes (for locally collected items only) and item indices that underpin the consumer price inflation statistics. Please note the data that are published are at a level which means that no individual retailer or service provider will be able to be identified.

Internationally, the CPI is known as the Harmonised Index of Consumer Prices (HICP). HICPs are calculated in each member state of the European Union (EU) according to rules specified in a series of European regulations developed by the European Commission (Eurostat) in conjunction with the EU member states. Eurostat releases figures for the Harmonised Index of Consumer Prices (HICP) for the month of January 2017 for EU member states, together with an EU average, on 22 February 2017. A summary of the latest European data is available from Eurostat’s database tables. Further information on HICP for the EU, Euro area and other EU member states is available from Eurostat's HICP web page.

Methods – CPI and other measures of inflation

The CPI, CPIH, RPIJ and RPI are compiled using the same underlying price data, based on a large and representative selection of around 700 individual goods and services for which price movements are measured in around 140 randomly selected areas throughout the UK. Around 180,000 separate price quotations are used every month to compile the indices. The outlets in which the prices are collected are selected randomly. Expenditure weights are held constant for 1 year at a time.

The selection of goods and services that are priced to compile these indices is reviewed annually. The contents of the 2016 basket are described in an article Consumer Price Inflation Basket of Goods and Services: 2016. The expenditure weights used to compile the indices are also updated each year. Additional details of the updated weights for 2016 are available in an article published on 22 March 2016 entitled Consumer Prices Index and Retail Prices Index – updating weights.

Rates of change for the CPI and CPIH are calculated from unrounded index levels, rather than from the published indices which are rounded to 1 decimal place. The use of unrounded indices increases the accuracy of the calculation. The unrounded index levels for the CPI and CPIH are available from Tables 63 and 64 of the Consumer Price Inflation dataset. By contrast, rates of change for the RPI and RPIJ are calculated from the published rounded indices.

Further information on the methods used to construct the CPI, CPIH, RPI and RPIJ, including differences in the methods used for each index, can be found in the Consumer Price Indices Technical Manual. Users and uses of consumer price inflation statistics provides further details of how consumer price statistics are used more generally.