Consumer Prices Index

In the Pre-Budget Report on 10 December 2003, the Chancellor of the Exchequer announced that the UK inflation target is changing from one based on the Retail Prices Index excluding mortgage interest payments (RPIX) to one based on the Harmonised Index of Consumer Prices (HICP).

 

Date

Index 2005 = 100

% increase on previous year

Dec 2006

104.0

3.0

Average Annual Increase

2.3%

Jan 2007

103.2

2.7

Feb 2007

103.7

2.8

Mar 2007

104.2

3.1

Apr 2007

104.5

2.8

May 2007

104.8

2.5

Jun 2007

105.0

2.4

Jul 2007

104.4

1.9

Aug 2007

104.7

1.8

Sep 2007

104.8

1.8

Oct 2007

105.3

2.1

Nov 2007

105.6

2.1

Dec 2007

106.2

2.1

Average Annual Increase

2.3%

Jan 2008

105.5

2.2

Feb 2008

106.3

2.5

Mar 2008

106.7

2.5

April 2008

107.6

3.0

May 2008

108.3

3.3

June 2008

109.0

3.8

Reflecting the new role as the main UK domestic measure of inflation for macroeconomic purposes, the National Statistician has decided that the UK HICP will now be known as the Consumer Prices Index in all National Statistics releases and publications. This should not be interpreted as implying that there is any intention to develop the CPI differently from the HICP. The CPI and HICP will remain one and the same index.

Like the RPI, the CPI measures the average change from month to month in the prices of consumer goods and services. However it differs in the particular households it represents, the range of goods and services included, and the way the index is constructed.

Retail Prices Index (RPI)
The Retail Prices Index is the most familiar general purpose measure of inflation in the United Kingdom and is continuously available from June 1947. It measures the average change from month to month in the prices of goods and services purchased by most households in the United Kingdom. The Chancellor of the Exchequer, in the Pre-Budget Report statement on 10 December 2003, confirmed that uprating of pensions and benefits and index-linked gilts will continue to be calculated with reference to the RPI or its derivatives.

Harmonised Index of Consumer Prices (HICP)
In the UK this measure, from 10 December 2003, is known as the CPI (see above). Eurostat will continue to publish this measure as the UK HICP. The HICP was launched in 1997 in response to the need for a Europe wide comparable measure of inflation (as required by the Maastricht Treaty). The HICP measures inflation, each month, in the European Monetary area as a whole and individually measures and compares each Member State.

The CPI index levels will be rebased from 1996=100 to 2005=100 with effect from the January figure published on 14 February. The opportunity has also been taken to standardise the procedures for the calculation of rates of change from index numbers. Rates of change will be calculated from un-rounded rather than rounded index number levels. This will increase the accuracy of the calculation and will also be consistent with the use of un-rounded index levels for the re-basing exercise

This coincides with the rebasing in Europe of the HICP. This follows a regulation which sets up a new common index reference period for all HICPs as well as establishing a procedure for the future updating of the HICP reference period. In the UK the HICP is known as the Consumer Prices Index.

The re-basing was necessary because extensions in coverage and the accession of the ten newest EU Member States has had the consequence that some HICP sub-indices and some countries HICPs refer to different index periods (since they start at different times). The new common index reference period will improve the relevance and transparency in the presentation of the HICPs.

 

further information:
Julie Stepney

related links
For further details please visit the National Statistics website http://www.statistics.gov.uk/ or contact the Information Department on 0121 456 2222.

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