Retail Price Index (RPI) m/m shows the change in the price of goods and services to reflect household spending in the given month compared to the previous month.
The RPI is the measure of national inflation, which is evaluated based on the basket of consumer goods. The basket includes food, clothing, motor fuel and other goods and services.
The basket of goods and services is revised at least once a year to reflect actual economic, technological and cultural patterns. Fixed weights are applied to changes in prices for each item in the list (the influence of the basket elements on the final index reflects their importance for a typical household's budget). If a certain brand of products disappears from the assortment of stores, the brand closest to it in terms of price and quality is chosen to preserve the representativeness.
Unlike the Consumer Price Index, which only includes housing rent cost, the Retail Price Index includes the following housing costs: taxes, house deprecation, building insurance, ground rent and other house purchase costs. Mortgage interest payments are also included in the index calculation. Therefore, the RPI dynamics strongly depends on the situation in the housing market and the state of the mortgage sector.
Also, the RPI differs from the consumer price index in the mathematical formula used: the arithmetic mean between the old and the new price is used in the RPI, while the CPI is calculated as a geometric mean. As a result, the RPI always produces higher inflation figures: in practice, the RPI grows annually by an average of 1.2 percentage points higher than the CPI.
The growth of the retail price index points to an inflationary growth in the country. This may affect British pound quotes positively.
The chart of the entire available history of the "United Kingdom Retail Price Index (RPI) m/m" macroeconomic indicator. The dashed line shows the forecast values of the economic indicator for the specified dates.
A significant deviation of a real value from a forecast one may cause a short-term strengthening or weakening of a national currency in the Forex market. The threshold values of the indicators signaling the approach of the critical state of the national (local) economy occupy a special place.
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