Editing Retail Price Index (section)

==Calculation==
[[File:UKinflation.png|thumb|right|300px|3 inflation indexes compared, based on 1988 as 100: Retail Price Index, RPIX and [[Consumer Price Index (United Kingdom)|CPI]] with the [[Average Earnings Index]] also included]]

[[File:UKinflation change.png|thumb|right|300px|The annual rate of change of the three indexes shows the volatility of the RPI measure, which is one of its disadvantages]]

The United Kingdom RPI 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 [[Living Costs and Food 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 given to the item, so that the contribution of the item's price is 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.

The RPI calculation employs a variation of the Carli method rather than the Jevons method employed in the calculation of RPIJ and CPI.<ref name="Office for National Statistics">{{citation|title=Consumer Price Indices, A brief guide|publisher=[[Office for National Statistics]]|url=http://www.ons.gov.uk/ons/guide-method/user-guidance/prices/cpi-and-rpi/consumer-price-indices--a-brief-guide.pdf|access-date=2015-01-10|url-status=live|archive-url=https://web.archive.org/web/20150110144818/http://www.ons.gov.uk/ons/guide-method/user-guidance/prices/cpi-and-rpi/consumer-price-indices--a-brief-guide.pdf|archive-date=10 January 2015|df=dmy-all}}</ref>

The unweighted Carli method overstates inflation rates. However as stated above, the RPI calculation employs weights,<ref name="Office for National Statistics"/> which remove this overstatement.

In practice the comparison is made over shorter periods, and the weights are frequently reassessed. Detailed information is published on the Office for National Statistics website.

The RPI includes an element of housing costs, whereas the following items are not included in the CPI: [[Council tax]], mortgage interest payments, house depreciation, buildings insurance, ground rent, solar PV feed in tariffs and other house purchase cost such as estate agents' and conveyancing fees. A further index, CPIH, has been published which includes housing costs but CPIH does not meet current international standards.<ref name="Office for National Statistics"/> The Office for National Statistics states that: 

<blockquote>The Consumer Prices Index including owner occupiers' housing costs (CPIH) is the most comprehensive measure of inflation. It extends the Consumer Prices Index (CPI) to include a measure of the costs associated with owning, maintaining and living in one's own home, known as owner occupiers'.<ref name="ONS2">{{citation|title=UK consumer price inflation: June 2017|publisher=[[Office for National Statistics]]|url=https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/june2017|access-date=2018-01-08|url-status=live|archive-url=https://web.archive.org/web/20180109063827/https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/june2017|archive-date=9 January 2018|df=dmy-all}}</ref></blockquote>

CPI is usually lower, though this is due more to the differences in the calculation formulas for the indices than to the differences in coverage. The UK Government announced in the [[June 2010 United Kingdom budget|June 2010 budget]] that CPI would be used in place of RPI for uprating of some benefits with effect from April 2011.<ref>
{{cite web|title=Budget June 2010 – benefits and tax credits|url=http://www.direct.gov.uk/en/Nl1/Newsroom/Budget/Budget2010/DG_188501|work=DirectGov|publisher=UK Government|access-date=25 October 2011|date=3 May 2011|url-status=dead|archive-url=http://webarchive.nationalarchives.gov.uk/20121015000000/http://www.direct.gov.uk/en/Nl1/Newsroom/Budget/Budget2010/DG_188501|archive-date=15 October 2012|df=dmy-all}}</ref>

Regarding state pensions, the UK government confirmed in their autumn statement in 2011 that these would go up by the greater of the CPI, average earnings, or 2.5%.
<ref name="hm-treasury.gov.uk"/>

The variability of the change in RPI, due to fluctuations in mortgage interest rates, is shown in the graph on the right. This was one of the arguments used in favour of changing to RPIX.