• UK consumer price inflation: June 2017

    1. Main points


    • The Consumer Prices Index including owner occupiers’ housing costs (CPIH, not a National Statistic) 12-month inflation rate was 2.6% in June 2017, down from 2.7% in May 2017.
    • This is the first fall in the CPIH inflation rate since April 2016, although it remains higher than in recent years.
    • Falling prices for motor fuels and certain recreational and cultural goods and services were the main contributors to the fall in the rate.
    • These downward contributions were partially offset by rising prices for furniture and furnishings.
    • The Consumer Prices Index (CPI) 12-month rate was 2.6% in June 2017, down from 2.9% in May 2017.


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    2. Things you need to know about this release

    Alongside this release, we have published an article that sets out our future approach to measuring changing prices and costs faced by consumers and households. The article sets out 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 Consumer Prices Index including owner occupiers’ housing costs (CPIH) as a comprehensive 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.

    On 15 June 2017, the National Statistician announced that pre-release access to Office for National Statistics publications would stop with effect from 1 July 2017. This is therefore the first consumer price inflation release where ministers and other officials did not receive access to the information prior to publication.

    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 Consumer Prices Index including owner occupiers’ housing costs (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.

    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.

    CPIH is not currently a National Statistic. It has been reassessed by the Office for Statistics Regulation (OSR) against the standards set out in the Code of Practice for Official Statistics. The assessment report published on 3 March 2016 included a number of requirements that need to be implemented for CPIH to regain its status as a National Statistic and we are working to address these.

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