2. Analysis of consumer price inflation

CPIH 12-month inflation rate

Table 1: CPIH, OOH component and CPI index values, and 12-month and 1-month inflation rates

UK, November 2018 to November 2019 CPIH Index

(UK, 2015 = 100) CPIH 12-

month rate CPIH 1-

month rate CPI Index

(UK, 2015=100) CPI 12-

month rate CPI 1-

month rate OOH Index

(UK, 2015=100) OOH 12-

month rate 2018 Nov 106.9 2.2 0.2 107.0 2.3 0.2 106.1 1.1 Dec 107.1 2.0 0.1 107.1 2.1 0.2 106.2 1.2 2019 Jan 106.4 1.8 -0.6 106.3 1.8 -0.8 106.2 1.1 Feb 106.8 1.8 0.4 106.8 1.9 0.5 106.3 1.1 Mar 107.0 1.8 0.2 107.0 1.9 0.2 106.4 1.1 Apr 107.6 2.0 0.6 107.6 2.1 0.6 106.5 1.2 May 107.9 1.9 0.3 107.9 2.0 0.3 106.6 1.2 Jun 107.9 1.9 0.0 107.9 2.0 0.0 106.7 1.2 Jul 108.0 2.0 0.0 107.9 2.1 0.0 106.8 1.2 Aug 108.3 1.7 0.3 108.4 1.7 0.4 106.9 1.1 Sep 108.4 1.7 0.1 108.5 1.7 0.1 107.1 1.1 Oct 108.3 1.5 -0.1 108.3 1.5 -0.2 107.2 1.2 Nov 108.5 1.5 0.2 108.5 1.5 0.2 107.3 1.2 Download this table Table 1: CPIH, OOH component and CPI index values, and 12-month and 1-month inflation rates .xls .csv

Figure 1: CPIH and CPI 12-month inflation rates remain at their lowest since late 2016 CPIH, OOH component and CPI 12-month inflation rates for the last 10 years, UK, November 2009 to November 2019 Source: Office for National Statistics – Consumer price inflation Download this chart Figure 1: CPIH and CPI 12-month inflation rates remain at their lowest since late 2016 Image .csv .xls

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.5% in November 2019, unchanged from October 2019.

The Consumer Prices Index (CPI) 12-month inflation rate was 1.5% in November 2019, unchanged from October 2019.

CPIH rose by 0.2% between October and November 2019, compared with 0.2% between October and November 2018.

Given that the OOH component accounts for around 17% of CPIH, it is the main driver for differences between the CPIH and CPI inflation rates.

Contributions to CPIH 12-month inflation rate

Figure 2: Housing and household services has made the largest contribution to inflation since November 2018 Contributions to the CPIH 12-month inflation rate, UK, November 2017 to November 2019 Source: Office for National Statistics – Consumer price inflation Notes: Individual contributions may not sum to the total because of rounding. More information on the contents of each group can be found in Table 3 in the accompanying Consumer price inflation dataset. Download this chart Figure 2: Housing and household services has made the largest contribution to inflation since November 2018 Image .csv .xls

Figure 2 shows the extent to which the different categories of goods and services have contributed to the overall Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate over the last two years.

Since November 2018, the largest upward contribution to the CPIH 12-month inflation rate has come from housing and household services. However, its contribution fell continuously from May to October 2019 as a result of falling contributions from electricity, gas and other fuels before rising slightly from 0.34 percentage points in October 2019 to 0.36 percentage points in November 2019.

There was also a large upward contribution of 0.24 percentage points to the CPIH 12-month inflation rate from restaurants and hotels, where prices rose in the year to November 2019 by 2.4%. However, this was down from last month’s 0.31 percentage point contribution because prices for overnight hotel accommodation fell between October and November 2019, compared with a rise between the same two months a year ago.

Transport’s once large upward contribution to the CPIH 12-month inflation rate fell continuously from April to September 2019, resulting in a September contribution about one-eighth the size that was seen in April. This was caused by falling contributions from motor fuels and transport services. Contributions started to increase again from October, reaching 0.11 percentage points in November. However, this remains low in comparison with the general levels seen throughout 2017, 2018 and the first half of 2019.

Also, within transport, the contribution to the inflation rate from motor fuels has been negative for the last four months, with pump prices in November 2019 down by 2.9% on last year. This means that since August 2019, petrol and diesel prices have been consistently lower than for the same month last year.

Contributions to change in the CPIH 12-month inflation rate

Figure 3: Offsetting contributions to change leave the headline rate unchanged Contributions to change in the CPIH 12-month rate, UK, between October and November 2019 Source: Office for National Statistics – Consumer price inflation Notes: Individual contributions may not sum to the total change in the headline rate between the latest two months because of rounding. More information on the contents of each group can be found in Table 3 in the accompanying Consumer price inflation dataset. Download this chart Figure 3: Offsetting contributions to change leave the headline rate unchanged Image .csv .xls

Figure 3 shows how each of the main groups of goods and services contributed to the change in the Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate between October and November 2019. The corresponding figures for the Consumer Prices Index (CPI) can be found in column F of Table 26 in the Consumer price inflation dataset.

The largest downward contributions to change in the CPIH 12-month inflation rate came from restaurants and hotels (0.07 percentage points), and alcohol and tobacco (0.05 percentage points). For these divisions, prices fell between October and November 2019 but rose between the same two months a year ago, with the main effects coming from overnight hotel accommodation and tobacco. The 3.4% average price rise from October to November 2018 for tobacco products reflected an increase in duty on such products announced in the Budget last year. There have been no further duty increases and there is only a small 0.1% increase in price between October and November of this year.

A further small downward contribution (of 0.03 percentage points) came from clothing and footwear, where prices rose between October and November 2019 but by less than a year ago, especially for women’s garments (which rose by 1.3% this year, compared with 2.1% last year). Within this group, the largest individual contributions came from women’s formal trousers and strappy tops.

Offsetting large upward contributions to change in the CPIH 12-month inflation rate came from food and non-alcoholic beverages (0.06 percentage points), and recreation and culture (0.05 percentage points). For these divisions, prices rose between October and November 2019 by more than between the same two months a year ago, especially for sugar, jam, syrups, chocolate and confectionery (which rose by 1.8% this year, compared with a rise of 0.1% last year). Within this group, boxes and cartons of chocolates, and chocolate covered ice cream bars drove the upward movement.

A small overall upward contribution also came from transport (0.02 percentage points), where prices fell between October and November 2019 but by less than a year ago. This was caused by various price movements across the division. Upward effects from second-hand cars and air fares were in part offset by a downward effect from rail fares.

Finally, small upward contributions to change in the inflation rate also came from furniture and household goods, and housing and household services.

Owner occupiers’ housing costs

Figure 4: Lower energy prices keep housing’s contribution to inflation relatively low Contributions of housing components to the CPIH 12-month inflation rate, UK, January 2015 to November 2019 Source: Office for National Statistics – Consumer price inflation Notes: Individual contributions may not sum to the total because of rounding. Download this chart Figure 4: Lower energy prices keep housing’s contribution to inflation relatively low Image .csv .xls

Figure 4 shows the contribution of owner occupiers’ housing costs (OOH) and Council Tax to the Consumer Prices Index including owner occupiers’ housing costs (CPIH) inflation rate in the context of wider housing-related costs. The contribution from OOH had been on a downward trend from a high in October 2016. However, it has stabilised since early 2018 and was the largest contribution to the CPIH 12-month inflation rate from all the housing and household services categories for most months in 2019, including November.

Electricity, gas and other fuels made a negative contribution during 2015 and 2016, but subsequent rises, most notably in electricity prices, saw the contribution turn positive through 2017 and into 2018. Further electricity and gas price rises in summer and autumn 2018 increased their contribution to the CPIH 12-month rate. The introduction of the Office of Gas and Electricity Markets’ (Ofgem’s) initial energy price cap resulted in reduced contributions to the CPIH 12-month inflation rate for January to March 2019. However, the contribution increased in April 2019 as energy providers responded to Ofgem’s subsequent raising of the price cap. From October 2019 onwards, the contribution to the CPIH annual inflation rate from electricity, gas and other fuels has been negative. Ofgem lowered the price cap for the six-month period in effect from 1 October because of recent reductions in costs paid by suppliers, mainly wholesale energy costs. This was reflected in the 4.4% fall in average prices for electricity, gas and other fuels in total between September and October 2019.

Increases in Council Tax starting in 2016 mean that its contribution has risen over recent years, though there was little change in the contribution when the 2019 increases were introduced in April this year. Conversely, the reduction in the contribution from rents is likely to be a result of a policy to reduce social housing rent starting from April 2016, although the contribution has risen slightly over the last year. Other housing costs (namely, regular maintenance and repair, along with water and sewerage services) tend to make small contributions to the 12-month inflation rate.