Consumer price inflation, UK: November 2017

• The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.8% in November 2017, unchanged from October 2017.
• The Consumer Prices Index (CPI) 12-month rate was 3.1% in November 2017, up from 3.0% in October 2017; it was last higher in March 2012.
• The largest upward contribution to change in both the CPIH and CPI rates came from air fares which fell between October and November but by less than a year ago.
• Rising prices for a range of recreational and cultural goods and services, most notably computer games, also had an upward effect.
• Falling prices in the miscellaneous goods and services category (covering products such as travel goods and financial services) provided the largest offsetting downward contribution.

The Bank of England were granted exceptional pre-release access to an estimate of the Consumer Prices Index (CPI) at 9.00am on Monday, 11 December 2017 so that the data were available for the Monetary Policy Committee meeting held on that day. Correspondence with the Bank of England is available.

On Tuesday, 19 December we will be publishing our first set of preliminary estimates of the Household Costs Indices (HCIs). The HCIs are a set of experimental measures, currently in development, that aim to reflect UK households’ experience of changing prices and costs. Estimates will be produced for retired and non-retired households, low- and high-income households, and households with and without children.

The National Statistics status of the Consumer Prices Index including owner occupiers’ housing costs (CPIH) was reinstated on 31 July 2017. A letter from the Director General for Regulation to the National Statistician detailed the actions that were taken to meet the requirements as set out in the CPIH assessment report.

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. Specifically, they refer to the CPIH as our lead measure of inflation based on economic principles; the Household Costs Indices (HCIs, currently under development with preliminary estimates published for the first time on 19 December) 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.

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. One way to understand this is to think of a shopping basket containing all the goods and services bought by households. Movements in price indices represent the changing cost of this basket. Consumer price indices – a brief guide gives an overview of the indices and their uses.

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.

This release also examines 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 depends 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. Explaining the contribution to change in the 12-month rate (2013) covers this concept in more detail.

The CPIH is the most comprehensive measure of inflation. It extends the 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.

Aside from including OOH and Council Tax, CPIH is otherwise identical to CPI. This means that, aside from these two components, the factors contributing to the CPI rate are the same as those contributing to the CPIH. For example, if food is reported as increasing the CPIH rate, it is also acting to increase the CPI rate. The size of the contributions for components other than OOH and Council Tax are exaggerated in the CPI compared with the CPIH because they account for a larger proportion of the overall index.

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

The Retail Prices Index (RPI) does not meet the required standard for designation as National Statistics. In recognition that it continues to be widely used in contracts, we continue to publish the RPI, its sub-components and RPIX. To view the all-items RPI and 12-month inflation rate and an at-a-glance comparison with other measures, please see the time series section of the inflation and price indices area of our website. The accompanying dataset and time series dataset provide more detailed information.

The figures in this publication use data collected on or around 14 November 2017.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month rate was 2.8% in November 2017, unchanged from October 2017. The steady increase in the inflation rate since late 2015 has slowed over the last eight months, with the rate having ranged between 2.6% and 2.8% since April 2017.

In comparison, the Consumer Prices Index (CPI) 12-month rate has risen slightly to 3.1% in November 2017 from 3.0% in October. The CPI rate is higher than the CPIH equivalent principally because the CPI excludes owner occupiers’ housing costs. These rose by 1.5% in the year to November 2017, less than the CPI rate of 3.1% and, as a result, they pulled the CPI rate down slightly, to CPIH.

Figure 1 compares the 12-month inflation rates for CPIH and CPI, along with the rate for the owner occupiers’ housing costs (OOH) component of CPIH. Given that OOH accounts for around 17% of CPIH, it is the main driver for differences between the CPIH and CPI inflation rates.

Figure 2 shows that price movements for all the broad categories of goods and services had an upward effect on the Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month rate in November 2017, as has been the case since March 2017. Figure 3 shows the corresponding figures for the Consumer Prices Index (CPI).

The largest upward contribution to the CPIH 12-month rate continues to come from housing and household services, albeit that contribution is less than was observed during the spring and summer months this year. The CPI excludes owner occupiers’ housing costs and, as a result, the largest upward contribution comes from transport.

Figure 4 shows the extent to which the different categories of goods and services have contributed to the overall CPIH 12-month rate over the last two years. In particular, transport, and food and non-alcoholic drink prices have been important factors in driving the changes in the rate.

Transport made a downward contribution to the rate until mid-2016, before increasing sharply to become the largest upward contributor by early 2017. This was due largely to increasing prices for motor fuels, reflecting increases in global oil prices together with the fall in the value of the pound. In contrast, since early 2017, the contribution from motor fuel to the CPIH 12-month rate has reduced.

Falling food and non-alcoholic drink prices resulted in this category making the largest downward contribution to the CPIH inflation rate throughout 2016. Towards the end of 2016, the inflation rate for this group gradually picked up, continuing to increase to 4.2% by November 2017, the highest for four years. This has resulted in a corresponding increase in the contribution to the CPIH 12-month rate, moving from negative to positive in early 2017.

Although not quite such an important factor in the change in the CPIH rate as the previous two categories, recreation and culture has also seen an increase in its inflation rate over this period. In the first few months of 2016 the rate was close to zero but has since climbed to the current rate of 3.2% in November 2017, the highest since January 2010.

Figure 5 shows how each of the main groups of goods and services contributed to change in the Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month rate between October and November 2017. Overall, the upward and downward contributions broadly offset each other, leaving the CPIH 12-month rate unchanged in November 2017. 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 upward contribution to change in the CPIH rate came from transport, where prices rose by 0.1% between October and November this year compared with a fall of 0.3% between the same two months a year ago. The contribution came principally from air fares, which fell by 10.4% this year compared with a larger fall of 13.4% a year ago.

Recreation and culture also had an upward effect, with prices of games, toys and hobbies rising between October and November this year by more than a year ago. This effect came from computer games whose prices are heavily dependent on the composition of bestseller charts, often resulting in large overall price changes from month to month. Within the broader recreation and culture category, there was a small offsetting downward effect from data processing equipment, with prices falling this year but rising in 2016, particularly for PC peripherals.

The upward contributions were partially offset by a downward effect from miscellaneous goods and services, where prices fell by 0.1% this year compared with a rise of 0.2% a year ago. The overall contribution comprised a range of small effects coming from areas such as other personal effects (for example, handbags), other financial services and jewellery, clocks and watches.

Figure 6 shows the contribution of owner occupiers’ housing costs (OOH) and Council Tax to the Consumer Prices Index including owner occupiers’ housing costs (CPIH) inflation rate in the context of wider housing-related costs. OOH has consistently been the largest contributor to the rate during the period from 2015 to date though it has fallen back slightly from a high in October 2016. The contribution from other components has varied.

Utility bills had a negative contribution during 2015 and 2016 but recent rises, most notably in electricity prices, have seen this category rise to become the second-largest contributor. Increases in Council Tax in 2016 and 2017 mean that its contribution has also increased over this period.

Conversely, the reduction in the contribution from rents is likely to be a result of a policy to reduce social housing rent starting from April 2016, whilst other housing costs (namely regular maintenance and repair, along with water and sewerage services) tend to make a very small contribution to the 12-month rate.

Data relating to the Retail Prices Index (RPI) are available in the accompanying dataset and time series dataset. To view the all-items RPI and 12-month inflation rate and an at-a-glance comparison with other measures, please see the time series section of the inflation and price indices area of our website.

Other important measures of inflation and prices include Producer price indices, the House Price Index and the Index of Private Housing Rental Prices (IPHRP). Prices economic commentary: December 2017 presents further analysis of these in addition to the Consumer Prices Index including owner occupiers’ housing costs (CPIH).

The individual price quotes (for locally-collected items only) and item indices that underpin the consumer price inflation statistics are available.

The Harmonised Index of Consumer Prices (HICP) provides a comparable measure of inflation for each member state of the EU. The UK HICP is identical to the UK Consumer Prices Index (CPI). Further information is available on the Eurostat website.

The Consumer Price Inflation Quality and Methodology Information report contains important information on:

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

The Consumer Price Indices Technical Manual covers the concepts and methodologies underpinning the indices in more detail.

The CPIH Compendium provides a comprehensive source of information on the Consumer Prices Index including owner occupiers’ housing costs (CPIH), with a focus on the approach to measuring owner occupiers’ housing costs (OOH).

The Consumer price inflation basket of goods and services article details the annual review process for the items making up the inflation basket used to calculate the UK consumer price inflation indices and describes the changes in the latest year.

Consume price inflation, updating weights describes the latest changes to the relative weights of items in the inflation basket to ensure they remain representative of current consumer spending patterns.