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UK inflation rate picks up to 0.5%

The Consumer Prices Index (CPI) rose by 0.5% in the year to June 2016, compared with a 0.3% rise in the year to May.

The June rate is a little above the position seen for most of 2016, though it is still relatively low historically.

Rises in air fares, prices for motor fuels and a variety of recreational and cultural goods and services were the main contributors to the increase in the rate.

These upward pressures were partially offset by falls in the price of furniture and furnishings and accommodation services.

CPIH (not a National Statistic) rose by 0.8% in the year to June 2016, up from 0.7% in May.

A brief description of consumer price inflation

Consumer price inflation is the rate at which the prices of goods and services bought by households rise or fall. It is estimated by using price indices. A way to understand this is to think of a very large shopping basket containing all the goods and services bought by households. Movements in price indices represent the changing cost of this basket. The infographic How is the Consumer Price Index calculated? explains how consumer price inflation is calculated. Consumer price indices are published monthly.

A price index can be used to measure inflation in a number of ways. The most common is to look at how the index has changed over a year. This is calculated by comparing the price index for the latest month with the same month a year ago. This is known as the 12-month inflation rate. This bulletin measures inflation to June 2016, so the 12-month rate measures changes in prices between June 2015 and June 2016.

A range of measures of consumer price and other price inflation are published. A tale of many price indices summarises information on the different measures.

What is the CPI?

The CPI is a measure of consumer price inflation produced to international standards and in line with European regulations. First published in 1997 as the Harmonised Index of Consumer Prices (HICP), the CPI is the inflation measure used in the UK government’s target for inflation.

The CPI is also used for purposes such as uprating pensions, wages and benefits and can aid in the understanding of inflation on family budgets. For more information see Users and uses of consumer price inflation statistics (2013).

Latest figure and long-term trend

The CPI 12-month rate (the amount prices change over a year) between June 2015 and June 2016 stood at 0.5%. This means that a basket of goods and services that would have cost £100.00 in June 2015 cost £100.50 in June 2016.

The rate is the same as observed for March and slightly above the 0.3% recorded for all other months of 2016. The rates for 2016 to date are still relatively low but are above those generally experienced in 2015, which was a year of historically low inflation, with the rate being at or around zero for much of the year. The largest downward pull on inflation in June 2016 and for 2016 to date comes from prices for food and non-alcoholic beverages. There also continues to be a downward pressure from transport prices, but this has eased during 2016 from the 2015 position. Upward pressures come from a variety of categories, most notably restaurant and hotel bills.

Source: Statistical bulletin: Consumer price inflation: June 2016