The Retail Prices Index (RPI) dropped back to 3.5 per cent in April, down from 3.6 per cent in March. This modest fall came as a result of a number of upward and downward pressures on prices. The largest downward pressures to RPI inflation came from lower prices for alcoholic drinks, clothing, fares and other travel and the price of motor cars. Offsetting these were upward pressures from housing and petrol.
The Consumer Prices Index (CPI) dropped back to 3.0 per cent in April, down from 3.5 per cent in March. This larger fall came as a result of large price rises a year ago in areas such as air transport (because of the timing of Easter) falling out of the measure this time. Transport prices rose between March and April this year, but by less than they rose between March and April 2011.Other downward pressures on the CPI included lower alcohol prices and lower prices for clothing. There were higher prices in restaurants and hotels.
The RPI and the CPI are calculated in different ways using different methodologies and different baskets of goods. The RPI includes mortgage interest payments, house insurance and council taxes whereas the CPI does not. By contrast, the CPI includes the cost of university accommodation and fees for stockbrokers.
Although the CPI has been the index favoured by Government in recent years, it has come under sustained criticism for not reflecting housing costs – a major component of most people’s disposable income. This led to a commitment some months ago to look at the introduction of a housing component into the CPI in 2013.
On 11 June 2012, the ONS will launch a public consultation on the recommended method of reflecting owner occupiers’ housing costs in an additional measure of consumer price inflation and its strategy for consumer price statistics. Following the recommendation by the Consumer Prices Advisory Committee (CPAC) at its 30 April 2012 meeting, the ONS is inviting views on using the rental equivalence approach as the preferred method of reflecting owner occupiers’ housing costs and will welcome users’ comments. Further information will be available on 11 June 2012.