The Office for National Statistics (ONS) introduced improved private rental and second-hand cars indices into the Household Costs Index in February 2024, it said in its bulletin covering January to March 20241. The same change is recorded in the following bulletin, covering April to June 20242. The HCIs are a separate set of measures from the CPI and CPIH, designed to show how inflation is experienced by different groups of households rather than by UK households as a whole1.
The ONS said the HCIs "complement" CPIH and CPI, and that the weight of each component in a household group's basket is based on the average household's share of expenditure, described as "democratic" weights, whereas the CPI and CPIH baskets reflect the total share of expenditure across all households, described as "plutocratic" weights1. The HCIs also include changes in mortgage interest rates, Stamp Duty and other costs related to the purchase of a dwelling, which are omitted from CPI and estimated using equivalent rental prices in CPIH1.
"we have introduced improved private rental and second-hand cars indices in February 2024"
The ONS also corrected an error in earlier publications. It said previous editions "contain an error regarding Consumer Price Index (CPI) comparisons", relating to the use of an outdated CPI weights file, affecting Figure 2 in the bulletin and its commentary and tables 26 and 27 in the reference tables1. The impact was estimated to increase the contribution of democratic weighting to the difference between HCI and CPI by up to a maximum of 0.51 percentage points in January 2023, when HCI annual inflation was 12.1%, while decreasing the contribution of other categories1. All CPI publications and HCI data were unaffected, as were the main points in the publications, and the error was to be corrected on 28 August 2024 alongside the next update1. The later bulletin states that it "has corrected an error found in previous publications"2.
The all-households HCI annual rate was 4.4% in the year to March 2024, slowing from 5.3% in January 20241. By June 2024 it had fallen to 2.5%, slowing from 4.5% in March 2024, compared with a June CPI annual inflation rate of 2.0%2. The ONS said the decline largely resulted from a reduction in electricity, gas and other fuel prices, along with slower growth in the cost of food and non-alcoholic beverages, and miscellaneous goods and services2.
| Group | Mar 2024 | Jun 2024 |
|---|---|---|
| All households | 4.4% | 2.5% |
| Income decile 2 (low) | 3.9% | 1.7% |
| Income decile 9 (high) | 5.0% | 3.3% |
| Mortgagor and other owner occupier | 5.5% | 3.7% |
| Outright owner occupier | 3.3% | 1.3% |
| Private renter | 4.6% | 3.2% |
| Social and other renter | 4.3% | 1.9% |
| Retired | 3.4% | 1.2% |
| Non-retired | 4.8% | 2.9% |
| With children | 4.8% | 2.9% |
| Without children | 4.2% | 2.3% |
Source: ONS Household Costs Indices1
Why it matters for households
The HCIs are the ONS's attempt to show inflation as different households feel it, rather than as a single national figure. The February 2024 change to the private rents and second-hand cars indices affects the rental cost component of these measures, and the ONS notes that the methodology for calculating changes in private rental prices was updated in February 20242. Private renters' HCI inflation was 4.6% in the year to March 2024 and 3.2% in the year to June 2024, higher than for social and other renters in both periods, at 4.3% and 1.9% respectively1.
The gap between groups remains wide. In the year to June 2024, mortgagor and other owner-occupier households had the highest annual rate at 3.7%, reflecting rising mortgage interest payments, while outright owner occupiers had the lowest at 1.3%2. High-income households (decile 9) saw costs rise 3.3%, against 1.7% for low-income households (decile 2)2. The ONS attributes the difference mainly to mortgage interest payments, which contributed 0.83 percentage points more for high-income than low-income households, and to falling gas, electricity and other fuel prices, which reduced the rate more for low-income households, with the difference between the two groups being 1.01 percentage points2.
The ONS describes the HCIs as official statistics in development and advises caution in using them, as estimates may be revised because of methodological improvements1.
What happens next
The bulletin covering January to March 2024 listed its next release as 28 August 2024, the date on which the CPI comparison error was to be corrected alongside the next HCI update1. The bulletin covering April to June 2024, published 28 August 2024, listed its next release as 28 November 20242.
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