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Retail Prices Index (United Kingdom)

 

 
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Retail Prices Index (United Kingdom)
 
 
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In the United Kingdom
United Kingdom

The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom , the UK or Britain,is a sovereign state located off the northwestern coast of continental Europe....
, the Retail Prices Index (RPI), also spelt Retail Price Index, is a measure of inflation
Inflation

In economics, inflation is a rise in the general price level of goods and services in an economy over a period of time. The term "inflation" once referred to increases in the money supply ; however, economic debates about the relationship between money supply and price levels have led to its primary use today in describing price inflatio...
 published monthly by the Office for National Statistics
Office for National Statistics

The Office for National Statistics is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to the Parliament of the United Kingdom....
.

The RPI is used by the government as a base for various purposes, such as the indexation of pensions and of the amounts payable on index-linked securities.

In principle it is constructed as follows:

  1. A base year or starting point is chosen.






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    In the United Kingdom
    United Kingdom

    The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom , the UK or Britain,is a sovereign state located off the northwestern coast of continental Europe....
    , the Retail Prices Index (RPI), also spelt Retail Price Index, is a measure of inflation
    Inflation

    In economics, inflation is a rise in the general price level of goods and services in an economy over a period of time. The term "inflation" once referred to increases in the money supply ; however, economic debates about the relationship between money supply and price levels have led to its primary use today in describing price inflatio...
     published monthly by the Office for National Statistics
    Office for National Statistics

    The Office for National Statistics is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to the Parliament of the United Kingdom....
    .

    The RPI is used by the government as a base for various purposes, such as the indexation of pensions and of the amounts payable on index-linked securities.

    In principle it is constructed as follows:

    1. A base year or starting point is chosen. This becomes the standard against which price changes are measured.
    2. A list of items bought by an average family is drawn up. This is facilitated by the Family Expenditure Survey.
    3. A set of weights are calculated, showing the relative importance of the items in the average family budget - the greater the expenditure, the greater the weight.
    4. The price of each item is multiplied by the weight, adjusting the item's size in proportion to its importance.
    5. 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. Much more information is available on the Office of National Statistics website, see below.

    Variations on the RPI include the RPIX
    RPIX

    RPIX is a measure of inflation in the United Kingdom, equivalent to the all items Retail Prices Index excluding mortgage interest payments.It was the UK's target rate of inflation from October 1992 to December 2003....
    , which removes the cost of mortgage
    Mortgage

    A mortgage is the transfer of an interest in property to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is the lender's security for a debt....
     interest payments, and the RPIY, which excludes indirect taxes (VAT
    Vat

    Vat and VAT may refer to:* Value added tax* A type of Packaging and labelling such as a barrel , storage tank, or tub, often constructed of welded sheet stainless steel, and used for holding, storing, and processing liquids such as milk, wine, and beer...
    ), local authority taxes as well as mortgage interest payments.

    The Retail Price Index is a distinct index from the Consumer Price Index
    Consumer Price Index (United Kingdom)

    The official measure of inflation of consumer price index of the United Kingdom is called the Consumer Price Index It is also called the Harmonised Index of Consumer Prices ....
    , and is regularly separately quoted by the UK news media.

    External links

    • at Office for National Statistics website


    See also

    Consumer price index
    Consumer price index

    A consumer price index is a measure of the average price of consumer goods and services purchased by households. It is a price index determined by measuring the price of a standard group of goods meant to represent the typical market basket of a typical urban consumer....
     (covers a general concept)