Retail Price Index (RPI) is a measure of the increase in prices for consumers and businesses on average across the country, over the last 12 months. This measure of inflation is published monthly by the Office for National Statistics.
The RPI looks at the prices of hundreds of items that we spend money on and it tracks changes in the cost of these items over time. It is produced by combining around 180,000 price quotes for over 650 representative items in 150 different areas across the UK.
This is known as the ‘basket of goods’ and is regularly updated to reflect changes in the things we buy. Examples of goods included in the basket are food, drinks, clothing, cinema tickets, furniture, cars, public transport, holidays, telecoms, electricity and water.
The annual rate of inflation shows how much higher or lower prices are compared with the same month a year earlier. So if the inflation rate is 3% in January, for example, prices are 3 per cent higher than they were 12 months earlier. Or, to look at it another way, we need to spend 3% more to buy the same things.
We compare this to the annual change recorded in the previous month to get an idea of whether price rises are getting bigger or smaller. If the annual rate has risen from 3% to 4% from one month to the next, prices are rising at a faster rate, if the rate has fallen - say from 3% to 2% - prices of the things we buy are still higher, but have not increased by as much.
The published RPI rate between January 2012 and January 2020 has ranged from 0.7% to 4.1%.