Consumer price inflation, UK: May 2020

• The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 0.7% in May 2020, down from 0.9% in April 2020.

• The largest contribution to the CPIH 12-month inflation rate in May 2020 came from recreation and culture (0.23 percentage points).

• Falling prices for motor fuels and a variety of recreational and cultural goods resulted in the largest downward contributions to the change in the CPIH 12-month inflation rate between April and May 2020.

• Rising prices for food and non-alcoholic drinks resulted in a partially offsetting upward contribution to change.

• As a result of the ongoing coronavirus (COVID-19) pandemic, we identified 74 CPIH items (or 14.2% of the CPIH basket by weight) that were unavailable to UK consumers in May, as detailed in table 58 of the Consumer price inflation dataset; this is down from 90 unavailable items in April; compared with the February 2020 index (the most recent “normal” collection), we have collected a weighted total of 81.6% (excluding unavailable items) of the number of price quotes for the May 2020 index, although the coverage varies across the range of items.

• The Consumer Prices Index (CPI) 12-month rate was 0.5% in May 2020, down from 0.8% in April.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 0.7% in May 2020, down from 0.9% in April 2020. This is the lowest observed since May 2016 when the 12-month rate was also 0.7%. The rate was last lower, at 0.6%, in February 2016.

The Consumer Prices Index (CPI) 12-month inflation rate was 0.5% in May 2020, down from 0.8% in April. This is the lowest observed since June 2016 when the 12-month rate was also 0.5%. The rate was last lower, at 0.3%, in May 2016.

The CPIH and CPI 1-month inflation rates were identical at 0.0% in May 2020, compared with 0.3% in May 2019.

Given that the owner occupiers’ housing costs (OOH) component accounts for around 16% of the CPIH, it is the main driver for differences between the CPIH and CPI inflation rates.

Figure 2 shows the extent to which the different categories of goods and services have contributed to the overall Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate over the last two years.

Over the last 10 years, the largest contribution to the annual CPIH inflation rate had come from either housing and household services or transport. However, this has changed because of a combination of reduced household utility bills and falling motor fuel prices. The largest contribution to both the April and May 2020 12-month headline rates came from recreation and culture. In May, the contribution was 0.23 percentage points. Despite not being the largest historically, recreation and culture has been one of the main contributors to the headline rate since 2017.

Between November 2018 and March 2020, the largest upward contribution to the CPIH inflation rate came from housing and household services. However, this group’s contribution fell to 0.16 percentage points in April 2020, from 0.51 percentage points in March. This remained at 0.16 percentage points in May 2020 and is the lowest contribution the group has made to the headline CPIH rate since November 2010.

Over the last two years, the contribution from transport has shown more variation than any other group, ranging from an upward contribution of 0.75 percentage points in August 2018 to a downward contribution of 0.20 percentage points in May 2020. 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 noticeably over the period.

The downward contribution in May 2020 was caused by a downward contribution of 0.42 percentage points from motor fuels partially offset by smaller upward contributions from other transport components. Average petrol prices stood at 106.2 pence per litre in May 2020, the lowest observed since April 2016, while average diesel prices were 113.4 pence per litre, the lowest since September 2016.

There was a further downward contribution to the CPIH inflation rate in May 2020 from clothing and footwear. Prices in this category fell by 3.0% in the year to May, resulting in the downward contribution of 0.15 percentage points. The contribution from clothing and footwear has fluctuated between positive and negative over the last two years.

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

The largest downward contribution (of 0.08 percentage points) to the change in the CPIH 12-month inflation rate came from transport, where the price of motor fuels fell this year but rose a year ago, contributing 0.12 percentage points to the easing in the headline rate. Petrol prices fell by 2.8 pence per litre between April and May 2020, compared with a rise of 4.2 pence per litre between the same two months a year ago. Similarly, diesel prices fell by 2.6 pence per litre this year, compared with a rise of 2.8 pence per litre a year ago.

Prices for motor fuels tend to move broadly in line with global prices for crude oil, but the effect is generally muted as consumer prices for motor fuels also include other costs such as transport, duty and retail costs, including operating costs that must be met even when sales are low. Global prices for crude oil fell sharply from the beginning of 2020 before recovering throughout May, albeit to levels well below the start of the year. Within the UK, those rises were not seen at the pumps as the coronavirus (COVID-19) lockdown continued.

Within the transport category, the downward contribution from fuels was partially offset by smaller upward contributions from road transport services and second-hand cars. It is important to note that as a result of the travel restrictions in place in the UK since 23 March 2020, the movement between April and May 2020 for some items has been imputed using the all-item monthly rate as outlined in Coronavirus and the effects on UK prices. This has resulted in relatively little change in coach fares between April and May this year compared with a large fall of around 23% a year ago. That fall may have been influenced by the April outbound and return journeys straddling the Easter holiday period in 2019, leading to higher prices in April followed by falls into May.

There was also a downward contribution of 0.08 percentage points from recreation and culture, where prices overall fell by 0.1% between April and May 2020, compared with a rise of 0.5% between the same two months a year ago. Within this broad group, there was a downward contribution (of 0.06 percentage points) from games, toys and hobbies, with the effect coming from a variety of traditional toys and games, plus computer games consoles and computer games. This movement partially reverses a large upward contribution (of 0.11 percentage points) to the change between March and April. Recording media also produced a downward effect between April and May as prices of music downloads and CDs purchased over the internet fell this year but rose a year ago.

For restaurants and hotels, there was a smaller downward contribution, where prices overall were estimated to have increased by 0.4% between April and May this year, compared with a larger increase of 0.8% between the same two months a year ago. Part of this contribution (0.01 percentage points) came from those items available to consumers this month for fast food and takeaway services, but the majority (0.02 percentage points) was the effect of imputing for the unavailable items using the all-item rate this year compared with actual price rises a year ago.

A downward contribution (of 0.04 percentage points) came from health, where prices overall fell by 1.4% this year compared with a rise of 0.2% a year ago. The effect came from pharmaceutical products, particularly pain killers and antihistamine tablets, and other medical and therapeutic products, particularly daily disposable soft contact lenses.

The largest, partially offsetting, upward contribution to the change in the CPIH 12-month inflation rate came from food and non-alcoholic beverages, with prices rising by 0.5% this year compared with a smaller rise of 0.1% a year ago. The effect of 0.04 percentage points came from a variety of product groups, with small upward contributions coming from such disparate products as packs of individual cakes, dried potted snacks, cheese spread, blueberries, packets of peanuts, premium potato crisps, bags of chocolate sweets, instant coffee and orange juice.

Overall, the 74 imputed items in the CPIH had an upward contribution of 0.01 percentage points to the change in the CPIH 12-month inflation rate. Most imputed items had no overall contribution to the change in the headline CPIH inflation rate. The largest upward contribution (of 0.03 percentage points) came from coach fares while there was an offsetting downward contribution from hotel overnight accommodation (of 0.01 percentage points).

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 into 2020.

In April 2020, the contributions of housing components to the CPIH 12-month inflation rate fell to their lowest level since November 2010 and remained around that same level in May. The fall since March was caused by reduced contributions from electricity, gas, liquid fuels, water supply and sewerage collection. These five categories had a combined downward contribution to the CPIH 12-month rate of 0.24 percentage points in May.

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. There was a negative contribution from electricity, gas and other fuels between October and December 2019, before the price reductions in January 2019 unwound leading to an upward contribution from January 2020. The latest price cap, introduced on 1 April 2020, saw prices of electricity rise slightly (by 0.2% on the month) and gas prices fall by 3.5% compared with larger electricity and gas price rises of 10.9% and 9.3% respectively in April 2019.

The increases in Council Tax that started in 2016 caused its contribution to rise over the following few years, but there was little change when the 2019 increases were introduced in April last year and a slight easing in the contribution in April this year.

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 though, has subsequently risen 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. The contribution from water and sewerage services turned negative in April this year when bills were reduced as a result of the Water Services Regulation Authority (Ofwat) encouraging suppliers to reduce household bills.

Consumer price inflation

Consumer price inflation is the rate at which the prices of goods and services bought by households rise or fall. It is estimated by using price indices. Consumer price indices, a brief guide gives an overview of the indices and their uses.

12-month inflation rate

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

Consumer Prices Index including owner occupiers’ housing costs (CPIH)

The CPIH is the most comprehensive measure of inflation. It extends the Consumer Prices Index (CPI) to include a measure of the costs associated with owning, maintaining and living in one’s own home, known as owner occupiers’ housing costs (OOH), along with Council Tax. Both of these are significant expenses for many households and are not included in the CPI.

Consumer Prices Index (CPI)

The CPI is a measure of consumer price inflation produced to international standards and in line with European regulations. First published in 1997 as the Harmonised Index of Consumer Prices (HICP), the CPI is the inflation measure used in the government’s target for inflation.

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

Retail Prices Index (RPI)

The RPI does not meet the required standard for designation as a National Statistic. In recognition that it continues to be widely used in contracts, we continue to publish the RPI, its subcomponents and RPI excluding mortgage interest payments (RPIX). To view the all-items RPI and 12-month inflation rate, 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 was originally intended to run until 22 April 2020 but, because of the coronavirus (COVID-19) pandemic, the period has been extended to 21 August 2020. The Authority and HM Treasury have agreed that they cannot conclude a meaningful consultation with businesses and individuals focused on mitigating the challenges that this public health and economic emergency has created.

Alongside the consultation on the future of the RPI, we 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.

Coronavirus (COVID-19)

In response to the coronavirus (COVID-19) pandemic, we are working to ensure that we continue to publish our consumer price statistics. In line with the current government guidelines, we are encouraging Office for National Statistics (ONS) staff to work from home and to avoid unnecessary travel and social contact. We have an established infrastructure, and these changes will not impact on our ability to produce our Consumer Prices Index including owner occupiers’ housing costs (CPIH), Consumer Prices Index (CPI) and Retail Prices Index (RPI) statistics.

For May 2020, as in April, there were challenges around some of our collection activities, as approximately 80% of the price quotes (45% by weight) for the CPIH basket are usually physically collected in stores across 140 locations in the UK. The remainder is collected by ONS staff from online sources and administrative data provided by external suppliers.

In preparing to collect the prices for this publication, we identified 74 goods or services (accounting for 14.2% of the CPIH basket by weight) across the CPIH basket of goods and services that were unavailable to consumers. These numbers are a little lower than for April as government guidance on some services relaxed. The list of unavailable items in May, and the changes to the list from April, are shown in table 58 in the Consumer price inflation dataset.

The Coronavirus and the effects on UK prices article describes the approach we have taken for imputing price movements for items that are currently unavailable to consumers to purchase. For unavailable items in the RPI, we have imputed price movements based on the all-available-items price movement of the RPI (annual or monthly, depending on whether the series is seasonal or not), and for the CPIH and CPI we have imputed price movements based on the all-available-items price movement of the CPI. It is necessary to use the CPI price movement for both, so that both indices are constructed from the same set of item indices.

Overall, the number of price quotes that are usually collected in store and that are used in constructing the May 2020 indices was 72.6% of the number of price quotes collected in February 2020 (excluding unavailable items). It is not unusual for the proportion of quotes to be below 100% as there are often prices that are either temporarily missing or where the price for a non-comparable replacement item is collected. For this reason, we have compared the coverage in the current month to the February index collected before the social distancing policies and movement restrictions came into effect. The price quotes collected by ONS staff or from administrative data account for approximately 20% of the price quotes in our CPIH sample. Once all price quotes have been weighted together, the overall coverage for goods and services available in May 2020 was 81.6% of the comparable coverage collected in February 2020 (excluding unavailable items).

For May 2020, in addition to the 74 unavailable items in the CPIH basket, we identified a further 13 items where the proportion of price quotes collected was below 20%. For most of these items, we based the price movement on the collected prices. However, for a small number, we made the decision to impute their price movement as the collected prices were uncharacteristic for those items. The categories, where the number of price quotes used in constructing the indices is less than half the number used in February, have been identified in relevant tables in the accompanying dataset, for example, in Table 3.

As the collection issues are likely to continue in subsequent months, we are continuing to monitor the resumption of services stopped during the lockdown period, and we will carefully consider how we will reintroduce items in the coming months.

We continue to engage with other National Statistical Institutes (NSIs) and international organisations to understand how they are responding to similar issues. Under Section 21 of the Statistics and Registration Services Act 2007, the Bank of England must make a determination on any changes to the coverage or basic calculation of the RPI that we propose, to establish whether such a change “constitutes a fundamental change in the index which would be materially detrimental to the interests of the holders of relevant index-linked gilts”. We have shared our plan with the Bank of England, and they have determined that none of the planned temporary changes outlined “were both fundamental changes to the coverage or basic calculation of the RPI, and also materially detrimental to the holders of relevant index-linked gilts”. The correspondence is available.

Coronavirus (COVID-19) supplementary analysis

To further understand the impact of these measures, in our Consumer prices alternative basket analysis: May 2020 we explore different methods of dealing with unavailable goods and services in consumer price inflation measurement.

CPIHY, CPIY and CPI-CT series

As a direct result of the challenges that we have encountered because of the coronavirus pandemic and our focus on ensuring that we continue to publish our consumer price statistics, we are postponing the publication of some supplementary series:

• the Consumer Prices Index including owner occupiers’ housing costs excluding indirect taxes (CPIHY)
• the Consumer Prices Index excluding indirect taxes (CPIY)
• the Consumer Prices Index at constant tax rates (CPI-CT)

These series will next be published with the July dataset in August.

Errors in mortgage interest payments and canned tuna series

An error has been found in the data used to calculate the mortgage interest payments component of the RPI for April 2020. The source data used in the compilation process did not accurately reflect the level of interest rates in the mortgage market. The CPI and CPIH do not include mortgage interest payments data and so were not affected.

The published RPI annual growth rate for April 2020 was 1.5%. If the index were to be recalculated using the correct interest rate, it would reduce the RPI annual growth rate by 0.1 percentage points to 1.4%.

However, in line with the published revisions policy, the index will not be revised. The data issue has been corrected and will not affect future months.

In addition, an error has been identified in the adjustment made to reflect a change in product size for a single price quote for “canned tuna” collected in April 2020. This error has no impact on the CPIH, CPI or RPI headline index numbers, annual or monthly growth rates to one decimal place. However, the various index levels affected for CPIH and CPI have been corrected alongside the publication of May’s consumer price statistics. Again, in line with the published revisions policy, the RPI index levels have not been corrected.

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 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.

Pre-release access

The Bank of England was granted exceptional pre-release access to an estimate of consumer price inflation data at 9:00am on Monday 15 June 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 Exchange of letters between the ONS, Bank of England and HMRC for exceptional pre-release access, June 2020.

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. From April 2020 onwards, as a result of the COVID-19 pandemic, we have collected all prices centrally by phone, email and from websites, and used imputation to produce series for some goods and services, as outlined in Coronavirus and the effects on UK prices.

The figures in this publication use data collected on or around 19 May 2020.

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 released on 18 September 2019.

Coronavirus and the effects on UK prices details our plans for data collection, compilation and publication of our various prices statistics following movement restrictions as a result of the COVID-19 pandemic.

The 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.

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, released 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.

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.