Difference Between CPI and RPI

CPI vs RPI

CPI or Consumer Price Index and RPI or Retail Price index are economic measures to calculate inflation. Though CPI and RPI are used for evaluating inflation, they are different in many aspects.

The CPI and RPI come with different values as they are calculated using different tools.

CPI is a measure of inflation, which is estimated on the basis of average price of goods and services purchased by consumers. It calculates the change in price for a constant market basket of goods and services from a specific period to the next period. On the other hand, the Retail Price Index or RPI is a measure of the change in cost of the market basket of retail goods and services.

Another difference that is noticed between the CPI and the RPI is the variation in the services and goods covered by the two. The Consumer Price Index does not take into account certain items that are included in the RPI. The Retail Price Index includes council tax, mortgage interest payments, buildings insurance and house depreciation. When the CPI includes certain financial service charges like stockbrokers’ fees, it is excluded in RPI calculation.

CPI weightings are based on household spending in the National Accounts. On the contrary, the RPI weightings are based on Food Survey and ONS Expenditure.

It has also been seen that the CPI is comparatively lower than the RPI. Another difference that can be seen is that the CPI calculation covers a broader section of the population in relation to RPI calculations.

Though the Retail Price Index is one of the most used measures for calculating inflation in the UK, the Consumer Price Index has superseded it in calculating inflation. Once a principal measure for calculating inflation in the UK, it was introduced in 1947.

Summary
1.The CPI and RPI come with different values as they are calculated using different tools.
2.The Consumer Price Index does not take into account certain items that are included in the RPI. The Retail Price Index includes council tax, mortgage interest payments, buildings insurance and house depreciation.
3.While the CPI includes certain financial service charges like stockbrokers’ fees, it is excluded in RPI calculation.
4.The CPI calculation covers a broader section of the population in relation to RPI calculations.
5.CPI weightings are based on household spending in the National Accounts. n the contrary, the RPI weightings are based on Food Survey and ONS Expenditure.

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