Consumer price inflation, UK: March 2023

• The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 8.9% in the 12 months to March 2023, down from 9.2% in February.
• The largest upward contributions to the annual CPIH inflation rate in March 2023 came from housing and household services (principally from electricity, gas and other fuels), and food and non-alcoholic beverages.
• On a monthly basis, CPIH rose by 0.7% in March 2023, compared with a rise of 0.9% in March 2022.
• The Consumer Prices Index (CPI) rose by 10.1% in the 12 months to March 2023, down from 10.4% in February.
• On a monthly basis, CPI rose by 0.8% in March 2023, compared with a rise of 1.1% in March 2022.
• The largest downward contributions to the monthly change in both the CPIH and CPI annual rates came from motor fuels, and housing and household services (particularly liquid fuels), partially offset by upward contributions from food, and recreation and culture.
• Core CPIH (excluding energy, food, alcohol and tobacco) rose by 5.7% in the 12 months to March 2023, unchanged from February; the CPIH goods annual rate eased from 13.4% to 12.7% over the two months, while the CPIH services annual rate rose slightly from 5.6% to 5.7%.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 8.9% in the 12 months to March 2023, down from 9.2% in February and from a recent peak of 9.6% in October 2022.

Indicative modelled consumer price inflation estimates suggest that the October 2022 rate was the highest rate in over 40 years (the CPIH National Statistic series begins in January 2006). In more recent months, the CPIH annual rate has eased to below 9.2%, a rate that was previously recorded just over 30 years ago, between September and December 1990. The slowdown in the annual rate between February and March 2023 came as a result of prices rising by 0.7% on the month compared with a rise of 0.9% a year earlier.

The Consumer Prices Index (CPI) rose by 10.1% in the 12 months to March 2023, down from 10.4% in February and from a recent peak of 11.1% in October 2022. Our indicative modelled estimates of consumer price inflation suggest that the October 2022 peak was the highest annual inflation rate since 1981 (the CPI National Statistic series begins in January 1997). The easing in the CPI annual rate between February and March 2023 came as a result of prices rising by 0.8% on the month compared with a rise of 1.1% a year earlier.

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 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 March 2023 mainly reflected price changes in the transport division, particularly for motor fuels. There were also downward effects from housing and household services, furniture and household goods, clothing and footwear, and restaurants and hotels. These were partially offset by upward effects coming from food and non-alcoholic beverages, and recreation and culture.

Transport

The annual inflation rate for transport slowed from 3.1% in February 2023 to 1.0% in March 2023, down for a ninth consecutive month from a recent peak of 15.2% in June 2022, and the lowest rate since 1.0% in November 2020. The rate was last lower in August 2020. The easing in the rate between February and March 2023 was caused by changes in the price of motor fuels.

Overall, motor fuel prices fell by 5.9% in the year to March 2023, compared with a rise of 4.6% in February. Average petrol and diesel prices stood at 146.8 and 166.5 pence per litre, respectively, in March 2023, compared with 160.2 and 170.5 pence per litre in March 2022. Petrol prices fell by 1.2 pence per litre between February and March 2023, compared with a rise of 12.6 pence per litre between the same two months a year ago after Russia invaded Ukraine in February 2022. Similarly, diesel prices fell by 3.0 pence per litre this year, compared with a rise of 18.8 pence per litre a year ago.

Partially offsetting the downward effect from motor fuels, there were smaller upward pushes between February and March 2023 from transport services and, to a lesser extent, second-hand cars. The annual rate for transport services rose from 7.8% to 9.8% between these months, with the upward effect coming from air and rail fares. Second-hand car prices fell by 4.5% in the year to March 2023, compared with a larger fall of 5.9% in the year to February.

Housing and household services

The annual inflation rate for housing, water, electricity, gas and other fuels was 11.6% in March 2023, down from 11.8% in February. The main driver behind the change was liquid fuels, with prices of heating oil falling by 6.7% between February and March this year, compared with a rise of 44.0% between the same two months a year ago.

Food and non-alcoholic beverages

The slowing in the headline rate was partially offset by an upward effect from food and non-alcoholic beverages, where prices rose by 19.2% in the year to March 2023, up from 18.2% in February. The annual rate for this category in March 2023 is the highest seen for over 45 years. Indicative modelled estimates suggest that the rate would have last been higher in August 1977, when it was estimated to be 21.9%.

The increase in the annual rate for food and non-alcoholic beverages between February and March 2023 was driven by price movements from 5 of the 11 detailed classes. The largest upward effect came from bread and cereals, where prices rose in the month to March 2023 but fell a year earlier, leading to an annual rate of 19.4% in the year to March 2023. This is the highest annual rate for bread and cereals on record (with the series starting in January 1989). Within this detailed class, the upward push between the latest two months came from a variety of biscuits and cakes.

Other smaller upward effects between February and March came from fruit, chocolate and confectionery, and meat, partly offset by a downward movement from oils and fats, where the annual rate slowed from 32.1% to 25.6%.

The annual rates in March 2023 for chocolate and confectionery, other food products (principally ready-meals and sauces) and hot beverages were each the highest on record (starting from January 1989).

Recreation and culture

Prices for recreational and cultural goods and services rose, overall, by 4.6% in the year to March 2023, up from 4.1% in February. The increase in the annual rate came from a wide range of the more detailed classes including data processing equipment and cultural services.

The upward pressures were partially offset by an easing in the annual rate from recording media (particularly CDs purchased over the internet), where prices fell by 6.3% in the year to March 2023 compared with a smaller fall of 2.8% in February. The movements in this class depend, in part, on the composition of bestseller charts. Short-term movements in the rate should therefore be interpreted with a degree of caution.

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 core CPIH annual inflation rate was 5.7% in March 2023, unchanged from February.

The CPIH all goods index rose by 12.7% in the 12 months to March 2023, down from 13.4% in February. The slowing in the rate has been caused by a downward contribution to the change from industrial goods, particularly energy, where prices rose by 39.7% in the year to March 2023, down from 48.3% in the year to February. This has been partially offset by an upward contribution from food, alcoholic beverages and tobacco.

The CPIH all services index rose by 5.7% in the 12 months to March 2023, up from 5.6% in February. The contributions to the change in the rate between February and March 2023 were small, with the largest upward effects coming from transport services (principally air and rail fares), and package holidays and accommodation. These were partially offset by a downward effect from other recreational and personal services (principally catering services).

Figure 5 shows how each of the main groups of goods and services contributed to the change in the annual CPIH inflation rate between February and March 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 February 2023 and the rate in March 2023. These differences sum to the change in the annual CPIH rate between the latest two months, that is, the slowing from 9.2% to 8.9%.

The easing in the annual CPIH rate into March 2023 was driven by downward contributions from 6 of the 12 divisions. These were led by a downward contribution from transport, where motor fuel prices fell by 1.2% between February and March this year compared with a relatively large 9.9% rise on the month a year ago. The largest, partially offsetting, upward contribution came from food and non-alcoholic beverages.

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, 8.9% in March 2023.

The largest upward contributions to the annual CPIH inflation rate in March 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 5.36 percentage points, over half of the annual CPIH inflation rate. Their combined weight comprises around 40% of the CPIH.

The annual contribution from food and non-alcoholic beverages (1.76 percentage points) was the largest since the start of the National Statistics series in 2006. Within this division, the largest contributions to the annual rate were from bread and cereals; milk, cheese and eggs; meat; and vegetables.

Transport made the largest upward contribution to the rate for much of 2021 and one of the largest throughout 2022. However, its contribution has fallen and it is one of the smallest in March 2023 at 0.10 percentage points.

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 March 2023, the contribution of housing and household services in total to the annual CPIH inflation rate was 3.60 percentage points, down from 3.68 percentage points in February.

The relatively high contribution to the rate since April 2022 came mainly from electricity, gas, and other fuels. The contribution from this group reflects price rises for gas and electricity in April and October 2022, following increases in the Office of Gas and Electricity Markets (Ofgem) cap on energy prices – partly offset by the government’s Energy Price Guarantee (EPG), which has limited the cost of electricity and gas since October 2022, “keeping a bill for a typical household in Great Britain to around £2,500 (annual equivalent)”. The easing in the contribution from this group between February and March 2023 principally results from the price of heating oil falling between these months in 2023 but rising in 2022.

OOH’s contribution to the CPIH annual inflation rate rose marginally from 0.67 to 0.68 percentage points between February and March 2023. Costs increased by 0.3% in the month to March 2023, compared with a slightly smaller rise of 0.2% in the same month a year earlier.

There was also a 0.32 percentage point contribution from actual rentals, unchanged from a month earlier. The contribution to the annual rate from Council Tax was also unchanged at 0.10 percentage points in March 2023. 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 rose by 6.2% in the year to March 2023, unchanged from February and slightly below the rates seen in the fourth quarter (October to December) of 2022. The CPI all goods index increased by 12.8% in the year to March 2023, down from 13.4% in February. The CPI all services index increased by 6.6% in the year to March 2023, unchanged from February.

As with the all-items annual inflation rates, the drivers of CPIH and CPI goods and services inflation are the same (with the exception of owner occupiers’ housing costs and Council Tax, which are excluded from CPI). The drivers 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 February and March 2023.

The slowdown in the annual CPI rate into March 2023 was driven by contributions from 6 of the 12 divisions, with the largest downward contribution of 0.29 percentage points coming from transport. Within this division, motor fuels made a downward contribution of 0.35 percentage points. The largest, partially offsetting, upward contribution to the change in the annual rate came from food and non-alcoholic beverages (0.10 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, namely housing and household services, and food and non-alcoholic beverages.

The contribution from food and non-alcoholic beverages (2.19 percentage points) was the largest on record (with the series starting in 1997).

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.

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)

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, please see the data time series section of the inflation and price indices area of our website. The annual RPI inflation rate was 13.5% in March 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.

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.

We have announced that on 3 May 2023 we will publish our shopping prices comparison tool, to see for the first time how the average prices of items have changed in the last year. Please note, from next month’s publication, the number of average prices in Table 54 and Table 55 in the consumer price inflation tables will be reduced, as the majority of average prices presented in these tables will be available through the shopping prices comparison tool.

Weights for consumer price inflation statistics

In line with usual practice at the start of each year, the expenditure weights used in compiling the Consumer Prices Index including owner occupiers’ housing costs (CPIH) and the Consumer Prices Index (CPI) were calculated using updated spending information. Normally, this would be national accounts household final consumption expenditure (HHFCE) data lagged by two years. However, the unprecedented events of the last few years meant we adjusted expenditure feeding into the weights update to incorporate some of the larger changes seen in spending patterns, so they were more reflective of the year immediately before use in consumer price inflation. Since consumers’ expenditure was affected by the lockdowns that were in place at the start of 2021, we decided to use the same broad approach in the 2023 update.

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 Harmonised Index of Consumer Prices weighting guidance (PDF, 135KB).

The COICOP classes that were adjusted are detailed in the 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 February 2023 are published in Tables 11 and 25 of the Consumer price inflation dataset. As with last year, we made no changes to the weighting process for the Retail Prices Index.

Alternative data sources for rail fares

We have published our final impact analysis on the transformation of consumer price statistics for rail fares. The new data and methods have been included in CPIH, CPI and RPI from the publication of the February 2023 indices 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 have not been 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 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.

We announced that the Council Tax rebate and Energy Bills Support Scheme are out of scope of the consumer price indices on 23 March and 31 August 2022, respectively. 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, we published the conclusion of our 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.

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 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 14 March 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 for 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.

Office for National Statistics (ONS), released 19 April 2023, ONS website, statistical bulletin, Consumer price inflation, UK: March 2023