While all of these inflation metrics apply the same approach to the shopping basket of goods and services and how they have evolved over time, they do it in various ways.
- RPI incorporates mortgage interest payments, implying that it is more accurate “House prices and interest rates are “heavily impacted.”
- Housing prices are not included in CPI calculations, but all other goods and services are.
- Housing costs are included in the CPIH, however it is calculated using a method known as “The term “rental equivalency” refers to the amount of rent a homeowner would pay for an equivalent property rather than the mortgage payments.
Which measure of inflation do we use?
The UK employs both metrics of inflation for different things, which has an impact on the amount of money you have in your pocket, which is confusing.
Various inflation rates produced by these indicators significant because they are linked to different costs and payments for consumers.
- Payments for personal independence (which are replacing the disability living allowance)
The government’s own spending, such as benefits and the state pension, is usually linked to the lower CPI rate. Learn more about the state pension in our guide.
Critics refer to this as “inflation shopping,” in which the government links spending to a lower CPI and income-generators (such as the auto tax) to a higher RPI.
Is the RPI the same as the inflation rate?
The Retail Price Index (RPI) is an older inflation indicator that is still reported since it is used to assess cost of living and pay escalation; nevertheless, the government does not consider it an official inflation rate. The RPI was created in June 1947, and it basically replaced the prior Cost of Living Index. It used to be the primary official indicator of inflation. In practice, however, the consumer price index (CPI) now primarily performs that purpose.
What is the most recent RPI?
Inflation in the United Kingdom has reached its highest level since 1992, with the CPI presently at 6.2 percent. The most recent RPI inflation rate was 8.2%.
As a result of the spike in global oil prices and the impact of economic sanctions against Russia, the Office for Budget Responsibility’s (OBR) inflation prediction for 2022 has nearly quadrupled, while growth prospects have been lowered.
Inflation is now predicted to peak at 8.7% this winter, up from the previous prediction of 4.4 percent in April 2022 in October 2021.
What is the difference between the Consumer Price Index (CPI) and the Retail Price Index (RPI)?
- In comparison to a base year, the Consumer Price Index alters the cost of goods and services purchased by households. The Retail Price Index (RPI) is a measure of consumer inflation that takes into account changes in the retail prices of a representative basket of goods and services.
- CPI was created in the aftermath of World War I, when prices skyrocketed. Workers wanted compensation due to a loss in real salaries and an increase in the cost of living. As a result, after July 1955, the cost-of-living index figures were converted to the consumer price index. The RPI superseded the older Interim Index of Retail Prices in the United Kingdom in 1947. Since 2013, the Office for National Statistics has emphasized the use of CPI rather than RPI as an official measure of inflation.
- The main distinction is that RPI covers housing expenditures such depreciation, road fund license, council tax, mortgage interest payments, and so on. CPI, on the other hand, does not include housing prices.
What is the October 2021 RPI rate?
- In October 2021 (Index: 113.4), CPIH inflation was 3.8 percent, up from 2.9 percent in September 2021.
- In October 2021 (Index: 113.6), CPI inflation was 4.2 percent, up from 3.1 percent in September 2021.
- In October 2021 (Index: 312.0), RPI inflation was 6.0 percent, up from 4.9 percent in September 2021.
RPI is no longer considered an official measure of inflation by the Office for National Statistics.
In September 2021, what is the RPI rate?
- In September 2021 (Index: 112.4), CPIH inflation was 2.9 percent, down from 3.0 percent in August 2021.
- In September 2021 (Index: 112.4), CPI inflation was 3.1 percent, down from 3.2 percent in August 2021.
- In September 2021 (Index: 308.6), RPI inflation was 4.9 percent, up from 4.8 percent in August 2021.
What is the December 2021 RPI?
The annual rate of inflation, as measured by the RPI, was 2.59 percent in December 2021, up from 2.38 percent in November 2021. (Table 2).
What is the problem with RPI?
This document summarizes the research conducted in order to provide a comprehensive picture of our present understanding of the Retail Prices Index’s shortcomings (RPI). Overall, the RPI is a poor indicator of general inflation, greatly overestimating and underestimating price changes and how they are experienced at different times.
The RPI’s status as a national statistic was revoked in 2013. We have a clear stance on the RPI: we do not believe it is a good gauge of inflation and discourage its usage. There are far greater alternatives to RPI, and any usage of RPI over these far superior alternatives should be scrutinized extensively.
Why does the ONS not modify the RPI to solve its flaws, as has been frequently asked?
To begin, it is critical to recognize that RPI has a variety of issues; it is not just the usage of the Carli formula that is problematic. This document’s primary body explains these difficulties.
A second argument originates from a 2012 consultation by the then-National Statistician, during which the possibility of modifying the RPI was discussed. “There is significant value to users in maintaining the continuity of the existing RPI’s long time series without major change, so that it may continue to be used for long-term indexation and index-linked gilts and bonds in accordance with user expectations,” according to the consultation’s conclusion. This statement is significant since it indicates that some consumers liked the index’s consistency despite its shortcomings.
The case against the RPI has been bolstered by ongoing study by the ONS and others, and evidence suggests it is likely to exaggerate inflation. Because there is no single perfect measure to compare it to, it is impossible to be accurate about the level of any upward bias. When compared to other inflation indicators, the RPI is currently roughly 1 percentage point higher than the CPIH and the experimental Household Costs Indices.
establishing a collection of measures to better reflect the changing prices and expenses encountered by consumers and households; this strategy, which includes measures like the Consumer Prices Index including owner occupiers’ housing costs (CPIH) and the Household Costs Indices, is detailed in a separate article.
RPI does not have the potential to become a good measure of inflation for the reasons stated in this text.
What is the current CPI rate in the United Kingdom for 2021?
In the 12 months to December 2021, the Consumer Prices Index, which includes owner occupiers’ housing prices (CPIH), increased by 4.8 percent, up from 4.6 percent in the previous 12 months.
Housing and household services (1.31 percentage points) and transportation (1.31 percentage points) contributed the most to the CPIH 12-month inflation rate in December 2021. (1.29 percentage points, principally from motor fuels and second-hand cars).
CPIH grew by 0.5 percent on a monthly basis in December 2021, compared to 0.2 percent in December 2020.
Food and non-alcoholic drinks, restaurants and hotels, furniture and home items, and apparel and footwear all contributed significantly to the shift in the CPIH 12-month inflation rate between November and December 2021.
Large downward contributions from transportation, recreation, and culture somewhat balance these.
In the 12 months leading up to December 2021, the Consumer Price Index (CPI) increased by 5.4 percent, up from 5.1 percent in November.
CPI climbed by 0.5 percent on a monthly basis in December 2021, compared to 0.3 percent in December 2020.
What is the November 2021 RPI rate?
- In November 2021 (Index: 114.1), CPIH inflation was 4.6 percent, up from 3.8 percent in October 2021.
- In November 2021 (Index: 114.5), CPI inflation was 5.1 percent, up from 4.2 percent in October 2021.
- In November 2021, RPI inflation was 7.1 percent (Index: 314.3), up from 6.0 percent in October 2021.
What is the RPI rate for 2020?
There were issues with some of our collecting activities in May 2020, as there were in April, because about 80% of the price quotes (45% by weight) for the CPIH basket are normally physically gathered in stores across 140 locations in the UK. The rest is gathered by ONS staff using internet resources and administrative data given by third-party vendors.
We discovered 74 goods or services (accounting for 14.2 percent of the CPIH basket by weight) across the CPIH basket of goods and services that were inaccessible to customers while collecting prices for this publication. Because government guidance on some services was softened, these numbers are a touch lower than in April. Table 58 in the Consumer price inflation dataset shows the list of unavailable items in May, as well as changes from April.
The Coronavirus and its Effects on UK Prices article explains how we calculated price changes for items that are now unavailable for purchase by customers. We imputed price movements for unavailable products in the RPI based on the RPI’s all-available-items price movement (annual or monthly, depending on whether the series is seasonal or not), and we imputed price movements for the CPIH and CPI based on the CPI’s all-available-items price movement. Both indices must be derived using the same set of item indices, so the CPI price movement must be used for both.
Overall, the number of price quotations acquired in stores and used in the construction of the May 2020 indices was 72.6 percent higher than the number received in February 2020. (excluding unavailable items). It’s not uncommon for the percentage of quotations to be less than 100% because there are frequently prices that are either temporarily missing or collected for a non-comparable replacement item. As a result, we compared the current month’s coverage to the February index, which was collected before the social distancing measures and movement limitations took effect. About 20% of the price quotes in our CPIH sample were acquired by ONS workers or from administrative data. The overall coverage for products and services available in May 2020 was 81.6 percent of the equivalent coverage obtained in February 2020 after all price quotes were weighted together (excluding unavailable items).
In addition to the 74 unavailable products in the CPIH basket for May 2020, we found 13 more items where the proportion of price quotations gathered was less than 20%. We based the price change on the collected prices for the majority of these items. However, we made the decision to infer their price movement for a small number of commodities because the gathered prices were out of character for those items. The categories in which the number of price quotes used to create the indexes is less than half of that used in February have been noted in relevant tables in the accompanying dataset, such as Table 3.
We are continuing to monitor the restoration of services halted during the lockdown period, and we will carefully examine how we will reintroduce things in the coming months, as collection challenges are expected to persist.
We’re still talking to other National Statistical Institutes (NSIs) and international organizations to see how they’re dealing with comparable problems. The Bank of England is required by Section 21 of the Statistics and Registration Services Act 2007 to make a determination on any proposed changes to the coverage or basic calculation of the RPI in order to determine whether such a change is justified “represents a fundamental change in the index that would be materially detrimental to the interests of holders of relevant index-linked gilts.” The Bank of England has reviewed our plan and found that none of the proposed interim modifications are feasible “were both substantial alterations to the RPI’s coverage and basic computation, as well as materially harmful to holders of relevant index-linked gilts.” The correspondence is at your disposal.
Coronavirus (COVID-19) supplementary analysis
In our Consumer pricing alternative basket analysis: May 2020, we look at different approaches of dealing with unavailable goods and services in consumer price inflation measurement to better understand the impact of these measures.
CPIHY, CPIY and CPI-CT series
We are deferring the release of some supplemental series as a result of the problems we have had as a result of the coronavirus epidemic and our focus on ensuring that we continue to publish our consumer price statistics:
- The Consumer Price Index excludes indirect taxes from home costs for owner-occupiers (CPIHY)
Errors in mortgage interest payments and canned tuna series
In the data used to calculate the mortgage interest payments component of the RPI for April 2020, a mistake was discovered. The interest rates in the mortgage market were not accurately reflected by the source data used in the compilation process. The CPI and CPIH are unaffected because they do not include statistics on mortgage interest payments.
For April 2020, the published RPI annual growth rate was 1.5 percent. The RPI annual growth rate would be reduced by 0.1 percentage points to 1.4 percent if the index were computed using the correct interest rate.
The index, however, will not be changed in accordance with the published modifications policy. The data problem has been resolved, and future months will be unaffected.
In addition, for a single price quote for “canned tuna” gathered in April 2020, an error was discovered in the adjustment applied to reflect a change in product size. The CPIH, CPI, and RPI headline index values, as well as annual and monthly growth rates to one decimal place, are unaffected by this inaccuracy. However, alongside the release of May’s consumer pricing figures, the different index levels affected for CPIH and CPI were adjusted. The RPI index levels have not been altered, as per the declared revisions policy.
After EU withdrawal
As the United Kingdom departs the European Union, it is critical that our statistics remain of high quality and are internationally comparable. Those UK statistics that conform with EU practice and rules will continue to do so in the same way they did before 31 January 2020 during the transition period.
We will continue to produce consumer price statistics after the transition period in accordance with the UK Statistics Authority’s Code of Practice for Statistics and globally recognised statistical guidance and standards.
The UN Statistical Division developed the standard international Classification of Individual Consumption According to Purpose (COICOP) system, and Eurostat developed the rules underlying the construction of the Harmonised Index of Consumer Prices (HICP) in collaboration with EU member states and European Economic Area countries for the CPI.
Pre-release access
At 9:00 a.m. on Monday, June 15, 2020, the Bank of England was allowed exceptional pre-release access to an estimate of consumer price inflation statistics so that the data would be ready for the Monetary Policy Committee meeting that day. Exchange of letters between the ONS, Bank of England, and HMRC for extraordinary pre-release access, June 2020 contains the letters requesting and agreeing to pre-release.
Methodology information
Consumer price indices are often based on prices gathered from outlets across the country, complemented by data gathered centrally via the internet and telephone. As a result of the COVID-19 pandemic, we’ve been collecting all prices centrally by phone, email, and via websites since April 2020, and we’ve utilized imputation to create series for some commodities and services, as detailed in Coronavirus and its Effects on UK Prices.
A brief guide to consumer pricing indices provides an overview of consumer price information.
The Consumer Prices Indices Technical Manual delves deeper into the concepts and methodology that drive the indices. On September 18, 2019, the most recent version was released.
Our intentions for data collection, compilation, and release of our various prices statistics following movement limitations as a result of the COVID-19 pandemic are detailed in Coronavirus and its Effects on UK Prices.
The CPIH Compendium is a comprehensive collection of information on the CPIH, with a focus on the methodology for calculating housing expenses for owner occupiers (OOH).
The Consumer Price Inflation QMI contains further quality and methodological information on strengths, limits, recommended uses, and how the data were developed.
Consumer price inflation, updating weights: 2020 was published on March 19, 2020, and covers the most recent update to the relative weights of items in the consumer price inflation basket in order to ensure that they stay realistic of current consumer purchasing trends. With the February index, a new source of information for several of the underlying low-level weights was also introduced. The report Impact of establishing a new data source for shop-type weights on consumer price indices, published on February 12, 2020, explains the source change.
The report Consumer price inflation basket of goods and services: 2020, published on March 16, 2020, covers the review process for the products that make up the inflation basket used to compute the UK consumer price inflation indices, as well as developments during the previous year.
Explaining the Contribution to Change in the 12-Month Rate (PDF, 37KB) explains how different types of products and services affect the change in the 12-Month Inflation Rate over the last two months. The magnitude and direction of these contributions are determined by how prices changed in the latter two months of this year compared to the same period last year. For example, even if a product’s price falls, it might still contribute to the change in the rate if it falls by less than it did between the same two months a year previously.
Users and uses of consumer price inflation statistics provides data on the users and uses of consumer price inflation statistics, as well as user experiences with these data. It also includes details on the properties of several consumer price inflation measures, as well as their potential applications.