In practice of course we all spend different amounts on various goods and services that show different price movements. The quantities or "weight" of the various items in the basket are chosen to reflect their importance in the typical household budget. If people spend more because they buy more goods this is not reflected in the index. The CPI, as a measure of that total cost, only measures price changes. The content of the basket is fixed for a period of 12 months, however, as the prices of individual products vary, so does the total cost of the basket.
Back to table of contentsĪ convenient way of thinking about the Consumer Price Index (CPI) is to imagine a very large "shopping basket" full of goods and services on which people typically spend their money: from bread to ready-made meals, from the cost of a cinema seat to the price of a pint at the local pub, from a holiday in Spain to the cost of a bicycle.
The approach used for other indices is generally very similar, although some specific differences are highlighted later in this guide. The rest of this article explains how the CPI is compiled. This is achieved by carefully recording the prices of a typical selection of products from month to month using a large sample of shops and other outlets (including the provision of goods and services via the internet) throughout the UK. The indices represent the average change in prices across a wide range of consumer purchases. The price of cars or hi-fi equipment might fall while the price of food or petrol may rise. The CPI and other indices measure a wide range of prices. RPIJĪ variant of RPI which is calculated using formulae that meet international standards.
In accordance with the Statistics and Registration Service Act 2007, the Retail Prices Index and its derivatives have been assessed against the Code of Practice for Official Statistics and found not to meet the required standard for designation as National Statistics. Retail Prices Index (RPI)Ī long-standing measure of UK inflation that has historically been used for a wide range of purposes such as the indexation of pensions and rents and index-linked gilts. In March 2016, the National Statistician announced the intention for CPIH to become our preferred measure of inflation. Other major measures of consumer price inflation include: CPIHĪ measure of UK consumer price inflation that include owner occupiers’ housing costs, which are important components of household expenditure. The CPI is also used for purposes such as uprating pensions, wages and benefits and can aid in the understanding of inflation on family budgets. First published in January 1996 as the Harmonised Index of Consumer Prices (HICP), the CPI is the inflation measure used in the government’s target for inflation. The CPI is a measure of consumer price inflation produced to international standards and in line with European regulations. In the UK, the main measure of inflation is the CPI.
Most of our price indices are published monthly. The price index estimates changes to the total cost of this basket. One way to understand a price index is to think of a very large shopping basket containing all the goods and services bought by households. Consumer price inflation is estimated by using price indices. Consumer Price Inflation (CPI) is the speed at which the prices of the goods and services bought by households rise or fall.