retail price index
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Related to retail price index: consumer price index
Retail Price Index
retail price index (RPI)a weighted average of the PRICES of a general ‘basket’ of goods and services bought by final consumers. Each item in the index is weighted according to its relative importance in total consumers’ expenditure (see Fig 169 ). Starting from a selected BASE YEAR (index value = 100), price changes are then reflected in changes in the index value over time. Thus, taking the example of the UK's ‘all items’ Retail Price Index (RPI), the current RPI base year is 1987 = 100, in February 2005 the index value stood at 189, indicating that retail prices, on average, had risen 89% between the two dates.
A retail price index is commonly used to measure the rate of INFLATION and as a GNP DEFLATOR. In the UK, the ‘all items’ RPI was formerly used to measure the ‘headline’ inflation rate, while the RPIX index, which excludes mortgage interest payments, measured the ‘underlying’ inflation rate. In December 2003, the RPI was replaced by the CONSUMER PRICE INDEX (CPI) as the government's ‘official’ meaure of inflation, thus bringing it into line with European Union practice. See HARMONIZED CONSUMER PRICE INFLATION RATE. See Fig 93 (a) , main INFLATION entry, for statistics on inflation rates in recent years.