This page was last updated in February 2020.

Consumer Price Index Inflation

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 0.8% in December 2020, up from 0.6% in November. The largest contribution to the CPIH 12-month inflation rate came from recreation and culture (0.35 percentage points).

Rising transport costs contributed 0.11 percentage points to the monthly change, while increasing prices for clothing, and recreation and culture items both contributed 0.10 percentage points to help increase inflation; these were partially offset by a downward contribution from falling food and non-alcoholic beverage prices.

On a monthly basis, the CPIH grew by 0.2% in December 2020, following a 0.1% fall in November. As a result of restrictions caused by the coronavirus (COVID-19) pandemic easing in some areas in December 2020, the number of CPIH items identified as unavailable was nine, accounting for 2.0% of the basket by weight; this number had decreased from 72 in November; for the December collection (which took place on or around 15 December 2020), we collected a weighted total of 81.5% of comparable coverage collected before the first lockdown (excluding unavailable items).

The Consumer Prices Index (CPI) 12-month rate was 0.6% in December 2020, up from 0.3% in November; on a monthly basis, CPI grew by 0.3% in December 2020, following a 0.1% fall in November.

Graph showing CPIH inflation to Dec 2020

CPI, CPIH, RPI

Consumer price indices are important indicators of how the UK economy is performing.

The indices are used in many ways by the government, businesses and society in general. They can affect interest rates, tax allowances, wages, state benefits, pensions, maintenance, contracts and many other payments. They also show the impact of inflation on family budgets.

Consumer price inflation is the rate at which the prices of the goods and services bought by households rise or fall; it is estimated by using consumer price indices. 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. The price index estimates changes to the total cost of this basket. Most Office for National Statistics (ONS) price indices are published monthly.

The Retail Prices Index (RPI) – a long-standing measure of UK inflation – and its derivatives do not meet the required standard for designation as National Statistics. The RPI, its subcomponents and the RPIX continue to be published as they are tied to long-term contracts.

 

GDP

Gross domestic product (GDP) growth is the main indicator of economic performance. There are three approaches used to measure GDP; the output approach, the expenditure approach and the income approach. GDP per head is calculated by dividing GDP in chained volume measures by the population estimates and projections. It is not a measure of productivity or well-being, but is a useful statistic as it removes the impact of the changing size of the population from headline GDP figures.