The consumer prices index (CPI) is the main United Kingdom domestic measure of inflation for macroeconomic purposes. The uses of the retail prices index (RPI) include indexation of pensions, state benefits and index-linked gilts. Both measure the average change from month to month in the prices of consumer goods and services purchased in the UK, although there are differences in coverage and methodology.
Both the CPI and the RPI are compiled each month using the same underlying price data, based on a large and representative selection of around 650 individual goods and services for which price movements are measured in around 150 areas throughout the UK. Around 120,000 separate price quotations are used every month to compile the indices.
The CPI and RPI can be thought of as measuring the monthly cost of a very large shopping basket comprising all the different kinds of goods and services bought by consumers in the UK. As the prices of individual items in the basket vary over time, the total cost of the basket will change. The spending patterns on