Retail Price Index: Difference between revisions
→History: clarify date |
m moved Retail Prices Index (United Kingdom) to Retail Price Index: apparent primary topic |
(No difference)
| |
Revision as of 17:12, 22 January 2011
In the United Kingdom, the Retail Prices Index or Retail Price Index[1] (RPI) is a measure of inflation published monthly by the Office for National Statistics. It measures the change in the cost of a basket of retail goods and services.
History
RPI was first calculated for June 1947.[2] It was once the principal official measure of inflation. Although it has been superseded in that regard by the Consumer Price Index (CPI), it is still regularly quoted by the UK news media.[3][4]
The RPI is still used by the government as a base for various purposes, such as the indexation of pensions, amounts payable on index-linked securities including index-linked gilts, and social housing rent increases.[5] Many employers also use it as a starting point in wage negotiation.[6]
In March 2009 the change in RPI measured over a 12-month period turned negative, indicating an overall annual reduction in prices, for the first time since 1960.[6] The change in RPI in the 12 months ending in April 2009, at -1.2%, was the lowest since records began in 1948.[7]
Housing associations lobbied the government to allow them to freeze rents at current levels rather than reduce them in line with the RPI, but the Treasury concluded that rents should follow RPI down as far as -2%, leading to savings in housing benefit.[5]
Calculation
Like any price index[citation needed], it is constructed as follows:
- A base year or starting point is chosen. This becomes the standard against which price changes are measured.
- A list of items bought by an average family is drawn up. This is facilitated by the Family Resources Survey.
- A set of weights are calculated, showing the relative importance of the items in the average family budget - the greater the share of the average household bill, the greater the weight.
- The price of each item is multiplied by the weight, adjusting the item's size in proportion to its importance.
- The price of each item must be found in both the base year and the year of comparison (or month).
This enables the percentage change to be calculated over the desired time period.
In practice the comparison is made over shorter periods, and the weights are frequently reassessed. Detailed information is published on the Office of National Statistics website.
Variations
Variations on the RPI include the RPIX, which removes the cost of mortgage interest payments, and the RPIY, which excludes indirect taxes (VAT) and local authority taxes as well as mortgage interest payments.
See also
- Consumer price index (general concept)
- Price index (more detailed statistical explanation)
References
- ^ Finance Bill — Rates of duty, etc.: reference to Retail Price Index — 18 Jul 2000
- ^ "Finding RPI Data". Office for National Statistics. 2010. Retrieved 2011-01-06.
- ^ National Statistics Online. 2008-10-14. Retrieved 2008-10-22
- ^ "Consumer inflation falls to 4.5%". BBC News. 2008-11-18. Retrieved 2008-11-29.
The Consumer Prices Index (CPI) measure dropped to 4.5% from 5.2% in September. ... Retail Prices Index (RPI)... fell from 5% to 4.2%
- ^ a b Landlords lose rent cuts battle, Inside Housing, 10 July 2009
- ^ a b Inflation measure turns negative , BBC News, 21 April 2009
- ^ Threat of deflation as retail price index falls to lowest-ever level, The Times, 20 May 2009
External links
- Finding RPI Data at Office for National Statistics website