What drove UK consumer pricing this year?

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By: Wise Marketer Staff |

Posted on December 16, 2005

What drove UK consumer pricing this year?

In the twelve months up to mid-November 2005, the UK's consumer prices index (CPI) rose by 2.1%, while the "all items" retail prices index (RPI) rose by 2.4% (or 2.3% excluding mortgage interest payments) - all of which were down slightly on the October 2005 figures. The largest downward effect on the CPI annual rate came from the transport category.

The UK government's National Statistics organisation released the latest figures which reveal sources of both increases and decreases in general consumer pricing.

Price decreases A large downward contribution came from fuels and lubricants as petrol and diesel prices fell for the second successive month, with the average price of ultra-low sulphur petrol down by 3.6p per litre, compared with a rise of 1.1p a year ago. There was also a large downward effect from air travel, with fares on international routes falling by more than a year ago, particularly to European destinations.

A small but partially-offsetting upward effect came from changes in air fares to domestic destinations. There was also a small downward effect from changes in new car prices, due to improvements in the specification of some models.

A small downward contribution came from restaurants and hotels, with the cost of accommodation services falling this year, particularly for overnight stays in UK hotels, but rising a year ago.

Increasing prices A small upward contribution to the CPI annual rate came from alcoholic beverages and tobacco, as retailers continued to pass on price increases which started in October affecting all tobacco items. Last year, tobacco prices were very little changed.

Another small upward contribution came from food and non-alcoholic beverages, mainly due to meat prices rising by more than last year, particularly for beef products. A partially offsetting small downward effect came from fruit, with prices rising by less than in the previous year.

Retail pricing trends As already noted, the largest downward effect on the RPI annual rate came from motoring costs. There was a large downward effect from petrol and oil, with petrol and diesel prices falling this year but rising a year ago. Partially offsetting small upward effects came from motor vehicle purchase costs (with the price of second hand cars falling by less than a year ago), and vehicle tax and insurance (with car insurance costs rising this year but being very little changed a year earlier).

Small downward effects on the RPI annual rate came from housing (mainly due to mortgage interest payments and house depreciation costs rising by less than a year ago), and fares and other travel costs (mainly due to air fares falling by more than a year ago).

But there was also a large upward effect on the RPI annual rate from household goods, with furniture prices rising by more than a year ago, particularly for kitchen units, settees and coffee tables. Other smaller upward effects on the RPI annual rate came from food (mainly from beef, other meat and unprocessed potatoes), tobacco (with prices for all items increasing in November compared with little change last year), and leisure goods (mainly books and newspapers, gardening products, and audio-visual equipment) although this was partially offset by a small downward contribution from discs and tapes.

Background The consumer prices index (CPI) is the main UK domestic measure of inflation for macroeconomic purposes. Both the CPI and RPI measure the average change from month-to-month (and year-to-year in a time series) in the prices of consumer goods and services purchased in the UK, although there are distinct differences in coverage and methodology.

The CPI and RPI effectively measure the monthly cost of a very large shopping basket comprising all the different kinds of goods and services bought by consumers in the UK. More detailed figures for the CPI and RPI can be found in Focus on Consumer Price Indices on the National Statistics web site, together with briefing notes on the latest published figures.

More Info: 

http://www.statistics.gov.uk