National Statistics logo 2 December 2004

Guide to

Calculating The RPI
More FAQs on the most familar measure of inflation


How is the RPI calculated?
The Retail Prices Index (RPI) is often described in terms of a shopping basket containing some 650 goods and services, chosen as indicators of price movements for a range of similar items. Taking bread as an example, several different types of bread are priced (e.g. large white loaves (sliced and unsliced), small brown loaf, large wholemeal loaf, bread rolls, pitta bread and french stick/baguette). These are considered as representative of the majority of bread consumption by most households.

Each price collector collects the price of a representative item (e.g. brand) for that price indicator in January and exactly the same item/ brand must be priced every month for a period of thirteen months. Each month price indices are constructed comparing the latest price with the price in the base month (January).

Finally price indices for price indicators are aggregated to items and then to sections which is the published level and rescaled to a reference point of January 1987=100. This allows price changes to be compared to a year earlier (i.e. the annual inflation rate) and to previous years.

How is it published?
Every month data is published on either the second or third Tuesday in a month (depending on the month) in a Consumer Price Indices First Release along with Additional Briefing Notes, which give the stories behind the figures. Data is also published in the electronic publication Focus on Consumer Prices available on the National Statistics website.

How often are the components reviewed?
The Office for National Statistics reviews the components of the RPI once every year, to keep it as up to date as possible, reflecting changes in consumers' preferences and the establishment of new products. Each year the changes are announced in a News Release and published in an article.

What are the origins of the RPI?
Although there were occasional official comparisons of prices for food in the nineteenth and early twentieth century, the Government first began a systematic, continuous check on the increase of the cost of living in 1914, but the coverage was very limited. After the Second World War a cost of living Advisory Committee was set up and an experimental price index known as the Interim Index of Retail Prices ran from 1947 to 1956. In January 1956, the first official Retail Prices Index began with various methodological changes implemented since then following reviews by RPI Advisory Committees. The latest Advisory Committees met in the early 1990s and made recommendations about the treatment of housing costs, holidays and car prices.

Why are there several different versions of the RPI?
No single inflation measure can meet all users' needs, so in addition to the all items RPI figure, the Office for National Statistics also publishes other inflation measures based on the RPI. These include:

- RPIX, which excludes mortgage interest payments;

- RPIY, which excludes mortgage interest rates and indirect taxes (VAT, council tax, duties vehicle excise duty, insurance tax and air passenger duty);

- Quarterly Pensioner Indices, which use the same price data as RPI, weighted for the typical spending of one and two-pensioner households and excluding items such as school dinners, work place canteen meals and housing; and the

- Tax and Price Index, which measures how much the average person's gross income needs to change to purchase the RPI basket after allowing for the average amount of income tax and national insurance paid on earnings.

In addition to these, there is the Consumer prices index (CPI) which is the government's inflation target, and is also used for international comparison. The CPI was previously published in the UK as the harmonised index of consumer prices (HICP).
Produced by Office for National Statistics
Published on 10 December 2003


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