Consumer price inflation, UK: January 2023

• The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 8.8% in the 12 months to January 2023, down from 9.2% in December 2022.

• The largest upward contributions to the annual CPIH inflation rate came from housing and household services (mainly from electricity, gas, and other fuels), and food and non-alcoholic beverages.

• On a monthly basis, CPIH fell by 0.4% in January 2023, but was little changed in January 2022.

• The Consumer Prices Index (CPI) rose by 10.1% in the 12 months to January 2023, down from 10.5% in December 2022.

• On a monthly basis, CPI fell by 0.6% in January 2023, compared with a fall of 0.1% in January 2022.

• The largest downward contribution to the change in both the CPIH and CPI annual inflation rates between December 2022 and January 2023 came from transport (particularly passenger transport and motor fuels), and restaurants and hotels, with rising prices in alcoholic beverages and tobacco making the largest partially offsetting upward contribution to the change.

• Core CPIH (excluding energy, food, alcohol and tobacco) fell to 5.3% in the 12 months to January 2023 from 5.8% in December 2022, the annual CPIH goods index eased slightly from 13.4% to 13.3% over the same period, while the annual CPIH services index fell from 5.8% to 5.2%.

• The estimates for January 2023 are constructed using updated expenditure weights; this is the first weights update for 2023 and the second update will be used to construct estimates for the February 2023 dataset, published on 22 March 2023.

The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 8.8% in the 12 months to January 2023, down from 9.2% in December 2022 and from a peak of 9.6% in October 2022. Indicative modelled consumer price inflation estimates suggest that October saw the highest annual rate in over 40 years (the CPIH National Statistic series begins in January 2006). In more recent months however, the CPIH annual rate has fallen back to levels below the rate of 9.2% recorded just over 30 years earlier, between September and December 1990. The fall in the annual rate between December 2022 and January 2023 was a result of prices falling 0.4% on the month, whereas they were little changed a year earlier.

The Consumer Prices Index (CPI) rose by 10.1% in the 12 months to January 2023, down from 10.5% in December 2022 and from a peak of 11.1% in October 2022. Our indicative modelled estimates of consumer price inflation suggest that the peak in the CPI rate in October 2022 was the highest annual inflation rate since 1981 (the CPI National Statistic series begins in January 1997). The slowing in the CPI rate between December 2022 and January 2023 was a result of CPI prices falling 0.6% in the month to January 2023, compared with a smaller fall of 0.1% the year before.

The main drivers of the annual inflation rate for CPIH and CPI are the same where they are common to both measures. However, the owner occupiers' housing costs (OOH) component accounts for around 16% of the CPIH and is the main driver for differences between the CPIH and CPI inflation rates. This makes CPIH our most comprehensive measure of inflation, and it is covered in more detail in Section 4: Latest movements in CPIH inflation in this bulletin, while Section 5: Latest movements in CPI inflation provides commentary on the CPI. Section 3: Notable movements in prices covers both CPIH and CPI, though the figures reflect CPIH.

The easing in the annual inflation rate in January 2023 mainly reflected price changes in the transport division, particularly for passenger transport and motor fuels. There were also downward effects from restaurants and hotels, with the largest, partially offsetting, upward effect coming from alcoholic beverages and tobacco.

Transport

The annual inflation rate for transport was 3.4% in January 2023, down for a seventh consecutive month from a peak of 15.2% in June 2022, and the lowest rate since February 2021. The main drivers behind the easing in the rate between December 2022 and January 2023 came from passenger transport services and motor fuels.

Within the transport category, the largest easing effect came from passenger transport services. Prices rose 7.6% in the year to January 2023, down from 18.3% in the year to December 2022. Annual rates fell across most passenger transport types, with the largest fall coming from passenger transport by air. Earlier in the year, annual inflation for passenger transport by air reached 40.3% in August 2022 and subsequently fell. However, in December 2022, the annual rate increased again from 24.3% to 44.1% (the largest recorded rate for this class since at least January 1989 when our constructed series begins) before easing to 18.4% in the year to January 2023. The impact of this large drop in the annual rate has been increased by the annual update of expenditure weights, with air fares accounting for 0.6% of the Consumer Prices Index including owner occupiers' housing costs (CPIH) basket in January 2023, compared with 0.2% a year earlier.

There was a similar effect in passenger transport by road, where annual inflation increased every month between May 2022 (3.5%) and October 2022 (8.2%). It then briefly dropped in November before reaching a peak of 11.3% in the year to December 2022. In the year to January 2023 the annual rate eased to 5.7%. This effect was driven largely by coach fares. The monthly inflation rate for coach fares increased 53.8% in December 2022 and then subsequently fell 45.7% in January 2023. However, there was also a downward effect from bus fares, which fell 3.8% in January 2023, compared with a small rise of 0.1% in the same month a year earlier. This was as a result of the £2.00 cap on single bus fares, which came into effect across England from 1 January 2023.

Overall, fuel prices rose by 7.7% in the year to January 2023, down from 11.5% in the year to December 2022. Average petrol prices fell 5.9 pence per litre (ppl) between December 2022 and January 2023 compared with a smaller monthly fall of 0.7ppl a year earlier. Diesel prices also contributed to the change in the rate, falling by 7.0ppl this year, compared with a smaller fall of 0.6ppl a year earlier. Average petrol and diesel prices stood at 149.4ppl and 172.1ppl in January 2023, and were last lower in February 2022 when petrol stood at 147.6ppl, and in March 2022 when diesel stood at 170.5ppl.

Restaurants and hotels

Restaurant and hotel prices also contributed to the easing in the CPIH annual inflation rate. Prices rose 10.8% in the year to January 2023, down from 11.4% in the year to December 2022 (which was the highest rate since the constructed historical estimate of 11.4% in September 1991, and which was last higher in August 1991, when it was 11.8%).

The effect came mainly from restaurant and café prices, which eased from 10.1% in the year to December 2022, to 9.4% in the year to January 2023. This was as a result of price falls between December 2022 and January 2023 (0.5% overall, compared with rises of 0.2% a year earlier), particularly for many on-sales of drinks.

There was also a smaller downward effect from accommodation services. Despite similar monthly price falls of 2.6% in January in both 2022 and 2023, the greater weight for accommodation services in 2023 means that the monthly fall in the current year has a greater influence on the change in the annual rate. This resulted in a downward movement between December and January.

Alcoholic beverages and tobacco

These downward movements were partially offset by alcohol and tobacco, where prices increased by 5.2% in the year to January 2023, up from 3.8% in December 2022. This was caused by monthly price rises across much of the alcohol and tobacco basket. Overall alcohol prices prices rose 4.6% in the month to January 2023 and tobacco prices rose 0.8% in the same period. This was compared with smaller monthly rises of 2.2% and 0.3% respectively a year earlier.

Figure 4 shows the annual inflation rates for the Consumer Prices Index including owner occupiers' housing costs (CPIH) all goods and all services series, together with CPIH excluding energy, food, alcohol and tobacco (often referred to as core CPIH). The CPIH inflation rate is added for comparison.

The CPIH all goods index rose by 13.3% in the 12 months to January 2023, down slightly from 13.4% in December 2022. The easing in the rate has been led by a downward contribution to the change from industrial goods, with overall energy prices rising 50.7% in the year to January 2023, down from 52.3% in the year to December 2022. There was a smaller effect from non-energy industrial goods - in particular vehicles, spare parts and accessories, and housing goods, partially offset by recreational goods - where the annual inflation rate eased slightly from 5.8% in December to 5.7% in January. This was partially offset by an upward contribution to the change in the rate from alcohol and tobacco, as discussed in Section 3: Notable movements in prices.

The CPIH all services index rose by 5.2% in the 12 months to January 2023, down from 5.8% in December 2022, which was the highest rate since 6.0% was observed in August 1992. The largest downward contribution to the change in the rate between December 2022 and January 2023 was from falling prices for passenger transport services, as discussed in Section 3: Notable movements in prices.

There was also a downward contribution from other recreation and personal services (particularly restaurants and cafes, and cultural services) with the annual inflation rate falling back from 8.7% in December 2022 to 7.8% in January 2023. There was a partially offsetting upward contribution from miscellaneous services (particularly for house valuation fees, where prices fell between December and January last year but were little changed this year). Overall, miscellaneous service prices rose 3.3% in the year to January 2023, up from 2.0% in December.

The core CPIH annual inflation rate fell from 5.8% to 5.3% between December 2022 and January 2023.

Figure 5 shows how each of the main groups of goods and services contributed to the change in the annual CPIH inflation rate between December 2022 and January 2023. To understand what has changed the inflation rate between these months, we can look at the differences between the contributions each of the 12 divisions made to the rate in December 2022 and in January 2023. These differences sum to the change to the annual CPIH rate between the latest two months, that is, the easing from 9.2% to 8.8%.

The easing in the annual CPIH rate into January 2023 was driven by downward contributions from 4 of the 12 divisions, led by a notable downward contribution (of 0.42 percentage points) from transport. The majority of this (0.26 percentage points) came from passenger transport services, with a further downward effect from motor fuels (0.10 percentage points). There was also a further large downward contribution from restaurants and hotels (0.08 percentage points), and the largest, partially offsetting, upward contribution came from alcoholic beverages and tobacco (0.05 percentage points).

Figure 6 shows the extent to which the distinct categories of goods and services have contributed to the overall annual CPIH inflation rate over the last two years. The contribution of each category to the annual rate depends on both the price movement in that category as well as its weight. Contributions help to understand what is driving the inflation rate by expressing it as the additive sum of its parts. For any one month, when added together, the contributions from the 12 divisions sum to the overall CPIH inflation rate, for example, 8.8% in January 2023.

The largest upward contributions to the annual CPIH inflation rate in January 2023 came from housing and household services (principally from electricity, gas, and other fuels), and food and non-alcoholic beverages. Contributions from these two divisions accounted for 5.26 percentage points - over half - of the annual CPIH inflation rate. The combined weight comprises 39.5% of the CPIH basket in January 2023. The contributions from housing and household services (3.70 percentage points), miscellaneous goods and services (0.43 percentage points), and health (0.12 percentage points) were the largest since the start of the National Statistics series in 2006.

The Consumer Prices Index (CPI) differs from the CPIH in that it does not include owner occupiers' housing costs (OOH) and Council Tax. Figure 7 shows the contribution of these components to the annual CPIH inflation rate in the context of wider housing-related costs. In January 2023, the contribution of housing and household services in total to the annual CPIH inflation rate was 3.70 percentage points, up from 3.67 percentage points in December 2022.

The relatively high contribution to the rate since April 2022 came mainly from electricity, gas, and other fuels. The contribution from this class increased from 2.53 percentage points to 2.56 percentage points in January 2023. This latest increase reflects price rises for gas and electricity following the increase in the Office of Gas and Electricity Markets (Ofgem) cap on energy prices on 1 January 2023. The recent increase in the cap applies to unit rates only. Standing charges remain in line with the levels set under the previous cap of 1 October 2022. Moreover, the government's Energy Price Guarantee (EPG), "will continue to protect households and customers by keeping a bill for a typical household in Great Britain to around £2,500 (annual equivalent)".

OOH's contribution to the CPIH annual inflation rate rose slightly from 0.65 to 0.66 percentage points between December 2022 and January 2023. Costs increased 0.4% in the month to January 2023, compared with a slightly smaller rise of 0.3% in the same month a year earlier. There was also a 0.32 percentage point contribution from actual rentals, little changed from a month earlier.

The contribution to the annual rate from Council Tax remains unchanged at 0.10 percentage points in December 2022. This reflects an annual rate of 3.4%.

While the Consumer Prices Index including owner occupiers' housing costs (CPIH) is our lead and most comprehensive measure of consumer price inflation, the Consumer Prices Index (CPI) is based on a harmonised methodology developed by Eurostat and allows for international comparisons to be drawn. For more information on the use cases for our consumer price inflation statistics, please refer to our Measuring changing prices and costs for consumers and households, proposed updates: March 2020 article. Figure 8 shows CPI inflation against the Group of Seven (G7) countries that produce a comparable measure.

Figure 9 shows the annual inflation rates for the CPI all goods and all services series, together with CPI excluding energy, food, alcohol and tobacco (often referred to as core CPI).

Annual Core CPI fell to 5.8% in the year to January 2023, from 6.3% in December 2022, and below its recent peak of 6.5% in both September and October 2022. The CPI all goods index increased by 13.3% in the year to January 2023, easing slightly from 13.4% in December 2022, and down from its October 2022 peak of 14.8%. The CPI all services index increased by 6.0% in the year to January 2023, down from its recent peak of 6.8% in December 2022.

As with the all-items annual inflation rates, the drivers of CPIH and CPI inflation are the same (with the exception of owner occupiers’ housing costs and Council Tax, which are excluded from CPI). The drivers of goods and services inflation are discussed in more detail in Section 4: Latest movements in CPIH inflation.

Figure 10 shows how each of the main groups of goods and services contributed to the change in the annual CPI inflation rate between December 2022 and January 2023.

The easing in the annual CPI rate into January 2023 was driven by contributions from 4 of the 12 divisions. The largest downward contribution to the change of 0.50 percentage points came from transport, with a further large downward contribution from restaurants and hotels (0.09 percentage points). The largest, partially offsetting, upward contribution to the change in the annual rate came from alcoholic beverages and tobacco (0.06 percentage points). Although the sizes of the contributions differ from CPIH, the main drivers to the change are the same where they are common to both measures.

Figure 11 shows the extent to which the distinct categories of goods and services have contributed to the overall annual CPI inflation rate over the last two years.

While the CPIH includes extra housing components not included in the CPI, the largest contributions to the annual CPI inflation rate were from the same divisions that made the largest contributions to the annual CPIH rate. These were housing and household services (primarily because of electricity, gas and other fuels), and food and non-alcoholic beverages.

Annual inflation rate

The most common approach to measuring inflation is the 12-month or annual inflation rate, which compares prices for the latest month with the same month a year ago. In any given month, the annual rate is determined by the balance between upward and downward price movements of the range of goods and services included in the index.

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. For an overview of the indices and their uses, please see our Consumer price indices, a brief guide: 2017 article.

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 are significant expenses for many households and are not included in the CPI.

Consumer Prices Index

The CPI is a measure of consumer price inflation produced to international standards and is based on European regulations for the Harmonised Index of Consumer Prices. 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 accompanying data 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, please see the data time series section of the inflation and price indices area of our website. The annual RPI inflation rate was unchanged at 13.4% in January 2023.

The UK Statistics Authority and HM Treasury launched a consultation in 2020 on the authority's proposal to address the shortcomings of the RPI. From 2030 (at the earliest), as outlined in the UK Statistics Authority response to the consultation, the CPIH methods and data sources will be introduced into the RPI. Additionally, the supplementary and lower-level indices of the RPI will be discontinued.

Weights for consumer price inflation statistics

In line with usual practice, the expenditure weights used in compiling the Consumer Prices Index including owner occupiers' housing costs (CPIH) and the Consumer Prices index (CPI) are updated at the start of 2023. Normally, the weights would be updated using the latest Blue Book-consistent household final consumption expenditure (HHFCE) dataset, which is lagged by two years (that is, 2021). The unprecedented events of the last few years have meant we have adjusted expenditure feeding into the weights update to incorporate some of the larger changes seen in spending patterns, so they are more reflective of the year immediately prior to use in consumer price inflation. More information on these adjustments can be found in Section 2 of our Consumer price inflation, updating weights: 2022 article.

Since consumers' expenditure was affected by the lockdowns that were in place at the start of 2021, we have decided to use the same broad approach for the forthcoming 2023 update of expenditure weights for our CPIH and CPI measures.

We estimated a 2022 dataset by taking the most up-to-date HHFCE data available (Quarter 1 (Jan to Mar) to Quarter 3 (July to Sept) 2022, second estimate) and imputing the fourth quarter based on the 2021 seasonal growth, since this is the most recent period with no national movement restrictions in place. We used the same threshold as in the previous year (25%, and also considering cases that fall in the range from 20% to 25%) to identify Classification of Individual Consumption by Purpose (COICOP) classes where there were large changes in spending levels between 2021 and 2022. For these classes, we replaced the usual 2021 data with the 2022 estimate. For some of these classes, we also made some additional changes:

• for energy classes that had experienced high inflation over the year, we adjusted our imputed estimate for Quarter 4 (Oct to Dec) 2022 to account for the general change in prices

• for some passenger transport and cultural services classes, we imputed Quarter 4 2022 using the 2019 growth rather than 2021; this was where 2021 spending may have been affected by ongoing movement restrictions in other countries or where consumer confidence was slower to recover following the end of national movement restrictions across the UK

Our approach is consistent with international guidance (PDF, 135KB).

The COICOP classes that have been adjusted will be detailed in the upcoming 2023 edition of our Consumer price inflation, updating weights article, alongside an explanation of the latest movements. The weights data for CPIH and CPI in January 2023 are published in Tables 11 and 25 of the Consumer price inflation dataset. As with last year, we have made no changes to the weighting scheme for the Retail Prices Index.

Alternative data sources for rail fares and second-hand cars

We have published our final impact analysis on the transformation of consumer price statistics for rail fares. The new data and methods will be included in CPIH, CPI and RPI from our next publication on 22 March 2023. While the headline impact of new rail fares data on CPIH, CPI and RPI is negligible, these new data enable us to produce more granular statistics offering important insights into the components driving inflation in the UK.

Changes to the RPI follow the annual governance process in line with section 21 of the Statistics and Registration Service Act 2007, details of which can be seen on our Correspondence on proposed changes to the Retail Prices Index (RPI) page.

New data and methods for second-hand car indices will not be incorporated at this time. We intend to make further necessary improvements to our methods and systems to ensure their reliability before we are ready to commit to using these data for live production of our consumer price indices.

The technology and processes we have developed lay the foundation for our future transformation work. More information about the project and our ongoing transformation plans can be found in our Transformation of consumer price statistics article, that we will update this spring with amended timelines.

As usual, we welcome your feedback on our work, either through this forum or by email to cpi@ons.gov.uk.

Treatment of the Council Tax rebate, Energy Bills Support Scheme (EBSS) and Energy Price Guarantee in consumer price inflation

On 3 February 2022, the UK government announced an Energy Bills Rebate package to help households to manage rising energy bills. On 26 May 2022, the UK government announced an additional cost of living support package. These packages included:

• a £150 non-repayable Council Tax rebate payment for all households that are liable for Council Tax in Bands A to D in England

• a £400 payment to support households with their energy bills through the Energy Bills Support Scheme (EBSS)

Subsequently, on 8 September 2022, the government announced the Energy Price Guarantee that would limit the unit cost of electricity and gas for households.

Decisions on whether to include rebates, subsidies and discounts in our consumer price inflation statistics are not clear cut and are taken on a case-by-case basis. We aim to be consistent with the national accounts, the public sector finances and other economic statistics. Decisions are based on international statistical guidance and practical considerations. More information on this is provided in Section 9.2 of our Consumer Price Indices Technical Manual.

We have previously announced that the Council Tax rebate and EBSS are out of scope of the consumer price indices. The formal Economic Statistics Classification decisions were that they were both current transfers paid by central government to the households sector. As such, both increased household income rather than reduced expenditure. The implication of the decisions was that they were not part of household expenditure and, as a result, out of scope of the consumer price indices.

On 31 October 2022, the Office for National Statistics (ONS) published the conclusion of its classification review of the Energy Price Guarantee (EPG) for domestic consumers. The payments under this scheme have been classified as subsidies on products, paid by central government to the energy suppliers in the non-financial corporations sector in the UK. The implication for consumer price inflation of the classification decision is that the EPG influences the prices that domestic consumers are charged for a unit of gas or electricity. It is these reduced unit prices that are being used in compiling the CPIH, CPI and RPI, which are hence lower while the schemes are in operation than if the EPG had not been introduced.

Households and the cost of living

To assist individuals in understanding how the rise in inflation affects their expenditure, we have produced a personal inflation calculator. The calculator allows users to enter the amount they spend across either a reduced or a wide range of categories, to produce an estimate of their personal inflation based on those spending patterns.

Every quarter, we publish experimental estimates of inflation rates for different types of households on a CPIH basis, including for example inflation rates for households in different income deciles, different types of tenure, and retirement status. On 15 February 2022, we published monthly data for Quarter 4 (Oct to Dec) 2022.

On 25 October 2022, we also published our experimental analysis of price changes for a sample of lowest-cost grocery items. The analysis uses in-house web-scraped data to investigate the price movements for a sample of 30 everyday grocery items (including pasta, rice, milk, and so on), which are commonly bought by households on low incomes.

If you have any questions or comments on the inflation calculator, please email cpi@ons.gov.uk.

Consumer price inflation historical estimates, UK, 1950 to 1988

On 18 May 2022, we published the Consumer price inflation, historical estimates, UK, 1950 to 1988 - methodology. This includes new estimates of CPIH over the period and improved estimates of CPI. These estimates (published in response to user need for a longer series) are indicative and are for analytical purposes only. They are not intended for official use and do not constitute part of the National Statistic series.

Previously, in December 2018, we published a CPIH historical series covering the period from 1989 to 2005 in the Consumer Prices Index including owner occupiers' housing costs (CPIH) historical series: 1988 to 2004 article. This series is an official statistic rather than a National Statistic, reflecting the historical uncertainty around the back casts.

Methodology information

The consumer price indices are normally 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 January 2023.

Our Consumer price indices, a brief guide gives an overview of consumer price statistics, while our Consumer Prices Indices Technical Manual covers the concepts and methodologies underpinning the indices in more detail.

Our CPIH Compendium provides a comprehensive source of information on the CPIH, focusing on the approach to measuring owner occupiers' housing costs.

Our Users and uses of consumer price inflation statistics: July 2018 methodology includes information on the users and uses of these statistics, and the characteristics of the different measures of inflation in relation to potential use.

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 currently published and those under development. We have also published proposed updates in our Measuring changing prices and costs for consumers and households, proposed updates: March 2020 article.

The three cases refer firstly to the Consumer Prices Index including owner occupiers' housing costs (CPIH) as our lead measure of inflation based on economic principles. They also refer to the Household Costs Indices (HCIs) as a set of measures to reflect the change in costs as experienced by different households and the Retail Prices Index (RPI) as a legacy measure that is required to meet existing user needs. Our Shortcomings of the RPI as a measure of inflation article describes the issues with the RPI.