LONDON / RankWire.AI / – UK inflation picked up pace in July, driven by increased household energy costs that pushed consumer prices to their highest annual growth since March. The Consumer Prices Index increased by 2.9% compared to the previous year, up from 2.6% in June. Month-on-month, prices grew by 0.3%, contrasting with a 0.1% rise in July last year. The Office for National Statistics noted that housing and household services contributed most significantly to the annual inflation increase.
The broader CPIH measure of inflation rose to 3.1% in July from 2.8% in June. This metric encompasses costs related to owner-occupied housing and Council Tax. Inflation within housing and household services surged to 4.1%, compared to 2.7% in June. Gas prices jumped 14.7% during July after a 7.2% decline in the same month last year. Electricity costs increased by 3.6%, reversing a 3.8% decrease recorded in July 2025.
This rise followed a 13% hike in the household energy price cap for July through September. According to Ofgem, this adjustment increased the annual expense for a typical dual-fuel household paying by direct debit by £221. Under the previous typical-consumption standard, the annual cost reached £1,862. The increase was partly driven by higher wholesale gas prices. These regulated energy price changes directly impacted July’s inflation figures, as households faced elevated gas and electricity bills.
Household expenses primarily fuel July’s inflation climb
Other consumer sectors also experienced increased annual price growth in July. Prices for furniture and household goods rose 1.0% from a year earlier after a 0.2% decline in June. Inflation for clothing and footwear climbed to 0.5% from a negative 0.5%. Conversely, food and non-alcoholic beverage inflation eased to 1.3%, marking its lowest annual rate since September 2021 and tempering some of the overall upward pressure on consumer prices.
Transport contributed the most to the decrease in the annual inflation rate. Inflation in this sector slowed to 3.6% in July from 5.7% in June. Diesel prices dropped by 8.8 pence per litre during the month, averaging 167.6 pence. Petrol prices fell 3.1 pence to 152.2 pence per litre. The annual inflation rate for motor fuel decreased to 15.5% from 21.3%. Airfares increased by 11.7% between June and July, staying below the 30.2% rise observed a year earlier.
Stable core inflation amidst easing services sector
Core CPI inflation held steady at 2.6% in July, unchanged from June. This core metric excludes energy, food, alcohol, and tobacco. Goods inflation increased to 2.2% from 1.7%, while services inflation slowed to 3.4% from 3.6%. The headline CPI rate remained 0.9 percentage points above the UK’s 2% inflation target. The data indicated that much of July’s acceleration was driven by increases in energy costs, with other underlying inflation measures changing only modestly during the month.
CPIH services inflation stayed at 3.6%, while core CPIH edged up to 2.9% from 2.8%. Housing and household services continued to be the largest contributors to CPIH inflation. Lower inflation in the transport sector helped offset some of the rise caused by higher energy costs. Additionally, food prices exerted less upward pressure than in previous months. The July report clearly illustrated a divergence across major categories, with gas and electricity lifting overall inflation while transport and food prices restrained the broader increase.