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Consumer Prices Index Rises to 1.8%

Posted: 20th May 2014 15:45
The Consumer Prices Index (CPI) grew by 1.8% in the year to April 2014, up from 1.6% in March.

Increases in transport costs, notably air fares, sea fares and motor fuels, provided the largest contribution to the rise in the rate. An overall fall in the price of food was the largest offsetting factor.

The timing of Easter is likely to have had an impact on the index – most notably for air fares and sea fares.

CPIH grew by 1.6% in the year to April 2014, up from 1.5% in March. RPIJ grew by 1.8%, unchanged from March.

Latest Figure and Long-Term Trend

The CPI 12-month rate (the amount prices change over a year) between April 2013 and April 2014 stood at 1.8%. This means that a basket of goods and services that cost £100.00 in April 2013 would have cost £101.80 in April 2014. This is the first time since June 2013 that the CPI 12-month rate has increased and continues the trend seen since Autumn 2013 of the CPI being in the region of 2.0%

Over the last five years, the three main contributors to the 12-month inflation rate have been food & non-alcoholic beverages, housing, water, electricity, gas & other fuels and transport (including motor fuels). Combined, these three sectors have, on average, accounted for almost half of the 12-month inflation rate each month.

The 12-month inflation rate for food & non-alcoholic beverages is currently at its lowest level in eight years. However, over this period prices for these goods have increased more than half as much again as the all items CPI (44% compared with 26%).

Consumer Prices Index (CPI): What are the main movements?

This section explains which goods and services had the biggest impact on the change to the 12-month rate between March and April 2014 and, where relevant, considers the longer-term inflationary trends for these goods and services.

The change in the CPI 12-month rate can be calculated by comparing the 12-month rates for two consecutive months. An alternative, and equally valid, approach is to calculate it by comparing the price change between the latest two months and the price change between the same two months a year ago. 

The CPI rose by 0.4% between March and April 2014, compared with a smaller rise of 0.2% between the same two months in 2013. The 1-month movement was therefore 0.2 percentage points higher this year compared with last year. This led to the CPI 12-month rate rising from 1.6% in March to 1.8% in April.

By far the largest upward contribution to the change in the CPI 12-month rate between March and April 2014 came from:

Transport: prices, overall, increased between March and April 2014, compared with a fall between the same two months a year earlier. Air fares and sea fares were the two largest contributors to the rise, with prices increasing by 18% and 22% on the month respectively. This compares with a fall of 6% and a rise of 3% for air fares and sea fares on the month a year ago. The timing of Easter was likely a factor in both cases, with the Easter weekend falling within the April collection period for these services this year, but mainly missing the March and totally missing the April price collection periods a year ago. There was also a notable upward contribution from motor fuels with prices, overall, falling by less than a year ago. Petrol prices were unchanged between March and April this year compared with a fall of 2.1 pence per litre between the same two months a year ago. Diesel prices fell by 0.5 pence per litre this year compared with a larger fall of 3.9 pence per litre in 2013.

The only other notable upward contribution to the change in the CPI 12-month rate between March and April 2014 came from:

Clothing & footwear: prices, overall, rose between March and April in 2014, while there was very little change between the same two months a year earlier. The upward contribution mainly came from a range of women’s clothing items and accessories, with reports of recoveries from sales and price increases across a number of retailers.

The largest downward contributions to the change in the CPI 12-month rate between March and
April 2014 came from:

Food & non-alcoholic beverages: prices, overall, fell by 0.5% between March and April 2014 compared with a rise of 0.7% between the same two months a year earlier. The downward contribution came from a wide range of foodstuffs, most notably vegetables where there were reports of a better growing season this Spring, compared to last year when widespread frosts and poor weather impacted on the quality of the crop.

Alcohol & tobacco: prices, overall, rose at a slower rate than a year ago. The downward contribution came from most types of alcohol (with the notable exception of beer) and tobacco.
Sales this year across a number of major retailers this year and price recoveries a year ago were contributing factors.

There were also smaller, but still notable downward contributions resulting from price movements in the miscellaneous goods & services and restaurants & hotels sectors.

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