Consumer price inflation, UK: October 2017

• The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.8% in October 2017, unchanged from September 2017.

• The inflation rate for food and non-alcoholic beverages continued to increase to 4.1%, the highest since September 2013.

• Rising prices for food and, to a lesser extent, recreational goods provided the largest upward contributions to change in the rate between September 2017 and October 2017.

• The upward contributions were offset by falling motor fuel and furniture prices, along with owner occupiers’ housing costs, which remained unchanged between September 2017 and October 2017, having risen a year ago.

• The Consumer Prices Index (CPI) 12-month rate was 3.0% in October 2017, unchanged from September 2017.

An article sets out the impact of planned improvements to the CPIH and CPI, designed to improve the representativeness of price movements of volatile items (specifically fresh fruit and vegetables).

The National Statistics status of the Consumer Prices Index including owner occupiers’ housing costs (CPIH) was reinstated on 31 July 2017. A letter (PDF, 160KB) 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) 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 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 10 October 2017.

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

Figure 1 compares the 12-month inflation rates for CPIH and the Consumer Prices Index (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 October 2017, as has been the case since March 2017. The corresponding figures for the Consumer Prices Index (CPI) can be found in column E of Table 26 in the CPI dataset.

Figure 3 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, fuel prices have fallen slightly overall and their contribution 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 4.1% by October 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.

Figure 4 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 rate between September and October 2017. The corresponding figures for the Consumer Prices Index (CPI) can be found in column F of Table 26 in the CPI dataset. Overall, the upward and downward contributions broadly offset each other, leaving the CPIH 12-month rate unchanged in October 2017.

Prices for food and non-alcoholic beverages made the largest upward contribution to change in the rate between September and October 2017, increasing by 0.4%, having fallen by 0.5% a year ago. The upward effect came from a broad range of food products and, to a lesser extent, soft drinks.

A smaller upward effect came from recreation and culture, with prices rising by 0.5% between September and October 2017, compared with a smaller rise of 0.2% a year earlier. This was due to prices for various recreational goods rising by more than they did a year ago, along with prices for package holidays, which rose by 0.4% between September 2017 and October 2017, having fallen by 0.4% in the same period last year.

Within transport, the main downward effect came from motor fuels, which also made the largest downward contribution to the overall CPIH 12-month rate. Prices fell by 0.4% between September and October 2017, having risen by 2.3% a year earlier. This downward effect was partially offset by prices for vehicles, which rose by more than they did a year ago, along with air fares, which fell by less than they did last year.

Within housing and household services, owner occupiers’ housing costs had the largest downward effect, with prices remaining unchanged between September 2017 and October 2017, having seen a particularly large increase of 0.4% in the same period a year ago. This was partially offset by electricity prices rising by 2.2% between September 2017 and October 2017, having been unchanged last year.

The downward effect from furniture and household goods came mainly from furniture and furnishings. Prices for these goods tend to fall in October, with the fall in 2017 being more pronounced than in 2016. Overall in 2017, furniture prices have seen relatively large increases compared with recent years, and the fall in October 2017 only partially offset these.

Figure 5 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 but 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: November 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.

An article on 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.