National Statistics logo 2 December 2004

Guide to

Measuring Inflation
Monitoring prices to produce various inflation measures


National Statistics produce a number of measures of inflation covering consumer prices, producer prices and corporate services prices.

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

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.

Producer Price Index (PPI)
The Producer Price Index is a monthly survey that measures the price changes of goods bought and sold by UK manufacturers. The output price index - sometimes referred to as factory gate prices - measures prices of goods sold by UK manufacturers. The Input index measures the prices of materials and fuel purchased by manufacturers. In addition there are a number of export and import price indices available.

Corporate Services Price Index (CSPI)
The Corporate Services Price Index is a quarterly survey of prices charged for services provided by UK businesses to other UK businesses and government. Industry-specific series covering about half the total corporate services sector are currently published as experimental statistics. The 'experimental' status means the indices are still under development and may be subject to revision. Price indices for industries not yet covered, eg computer services, are under development and are being added progressively to the published series.
Produced by the Office for National Statistics
Published on 10 December 2003


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