Retail price index (RPI)

Retail price index (RPI)

The Retail Price Index (RPI) is one of the two main measures of consumer inflation produced by the United Kingdom’s Office for National Statistics (ONS). Thus, most of the information is based on the UK.  

The term “inflation” refers to a sustained rise in the price of goods and services throughout an economy. Thus, a rise in inflation would suggest a decline in the currency’s purchasing power. Inflation is calculated using a variety of metrics, such as the Retail Price Index (RPI). The retail price index tracks the change in average prices over a specific period. A hypothetical shopping cart called the “Basket of Products” represents the important goods and services individuals are expected to purchase. 

What is RPI? 

The retail price index (RPI) is an unofficial measure of inflation that analyses the variation in monthly prices for retail items and services to calculate inflation. It is known as the consumer price index (CPI) in the USA. It is published monthly by the Bureau of Labour Statistics (BLS). The RPI is based on the prices of a representative sample of retail goods and services. 

The RPI is determined as an arithmetic mean to determine how much different daily-use products and services cost. It mostly increases salaries, rent, pensions, index-linked gilts, and other costs. 

Understanding RPI 

The RPI, a more traditional measure of inflation, is still reported because it determines the cost of living and wage growth. Still, it is not regarded as the government’s official inflation rate. RPI was initially calculated for June 1947, replacing the earlier Cost of Living Index. It once served as the primary official indicator of inflation.  

The RPI is important because it adjusts government benefits and pensions for inflation. It is also used by businesses to make decisions about prices and wages. It is still used to determine how much social housing rent, pensions, wages, interest rates on index-linked gilts, student loan rates, and other yearly costs rise.  

Nonetheless, the Consumer Price Index (CPI) now serves as the official replacement as a gauge of inflation recognised nationally. The ONS assessed RPI data following the Statistics and Registration Service Act of 2007 and the Code of Procedure for Official Statistics.  

As a result, it was revealed that RPI needed to be more effective in upholding the current state of the National Statistics. CPI was thus formally chosen as the inflation indicator. Due to its use in long-standing contracts tied to inflation, the RPI remains the most widely used indicator despite its status. RPI data is never altered after it has been published. 

History of RPI 

The Interim Index of retail prices, used since June 1947, was replaced by RPI in 1956. It once served as the primary official indicator of inflation. The CPI has returned it in that sense. The government continues using the RPI as a benchmark for several calculations, including the amounts due on index-linked instruments, such as gilts and rent increases for social housing. It’s also a common place for companies to negotiate.  

Since 2003, the government has employed neither the inflation objective for the Bank of England’s Monetary Policy Committee (BEMPC) nor the foundation for indexing former public sector employees’ pensions. Since 2016, the UK’s state pension has been indexed by the higher CPI or 2.5% growth in average wages (“the triple lock”). 

Recently, the ONS proposed certain changes to the RPI framework. The common budgetary actions taken in the fiscal year that ends in 2023 may lower the yearly RPI rate by 0.09% because the monthly rate changes for the fiscal year ending in 2023 (0.12) will be balanced out by the monthly rate deviations for the fiscal year ending in 2022 (0.03). Remember that the RPI rate increased 6.4% over the previous 12 months, from 1.4% in January 2021 to 7.8% in January 2022. 

Formula of RPI 

The USA’s RPI is calculated using a formula that considers the prices of a representative basket of goods and services. The basket of goods and services is updated periodically, and the RPI is calculated using data from the previous month. The basket of goods and services is divided into eight categories: food and beverages, housing, apparel, transportation, medical care, recreation, education, and others. 

Prices are collected for a representative sample of items in each category. The weights are then applied to the price changes for the items in the sample to arrive at the RPI. 

Calculation of RPI 

RPI is calculated by the BLS and is released monthly.  

 

Frequently Asked Questions

RPI is an unofficial inflation measure that determines price variations for retail products and services, including home prices. The CPI excludes housing costs and is an official inflation index defining price adjustments for products and services. Moreover, RPI only considers UK homes, leaving out 4% of the highest-income and pensioner-dependent households. 

The RPI calculates the inflation rate and cost of living by analysing the price change of a sample of retail goods. RPI needed to be more accurate in gauging current inflation rates. Typically, it overestimates or underestimates the rate of change in prices, which is over or understated inflation. RPI needed to be more of a gauge of inflation. It is still used to determine how much social housing rent, pensions, wages, interest rates on index-linked gilts, student loan rates, and other yearly costs rise. 

The retail price index table in the USA is 300.84 in 2023. 

The RPI calculator utilises the unadjusted RPI for All Urban Consumers average series for all goods across all US cities. This information reflects changes in the cost of all consumer products and services urban families consume. 

The CPI is typically the best metric to use when modifying consumer payments so that people may buy a market basket of goods and services comparable to one they could buy in a previous period at today’s prices. 

 

    联系我们开设账户

    需要帮助吗?请分享您的详细资料,我们会给您答复。

    IMPORTANT INFORMATION

    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  

     

    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com