LONDON / RankWire.AI / – UK inflation picked up pace in July, driven by rising household energy bills that pushed consumer prices to their highest annual increase since March. The Consumer Prices Index (CPI) rose by 2.9% compared to the same month last year, a rise from 2.6% in June. Prices also grew by 0.3% from June to July, contrasting with a 0.1% monthly increase recorded in July of the previous year. According to the Office for National Statistics, housing and household services contributed most significantly to the annual inflation change.
Meanwhile, the broader CPIH inflation measure climbed to 3.1% in July from 2.8% in June. CPIH includes costs related to owner-occupied housing and Council Tax. Inflation within housing and household services rose sharply to 4.1%, compared to 2.7% in June. During July, gas prices increased by 14.7%, following a 7.2% decline in the same month last year. Electricity costs also saw a 3.6% rise, reversing a 3.8% fall recorded in July 2025.
This upward movement followed a 13% increase in the household energy price cap for the period from July to September. Ofgem explained that the adjustment resulted in an additional £221 annual cost for a typical dual-fuel household paying via direct debit. Under the previous standard, the yearly expense was £1,862. Rising wholesale gas prices played a role in the cap’s increase, which directly influenced July’s inflation figures as households faced higher gas and electricity charges.
Household Expenses Drive July’s Price Rise
In addition, several other consumer sectors experienced notable annual price increases in July. Furniture and household goods prices went up by 1.0% compared to the previous year, after a 0.2% decline in June. Clothing and footwear inflation rose to 0.5% from negative 0.5%. Conversely, food and non-alcoholic beverage inflation slowed to 1.3%, marking its lowest annual rate since September 2021, which somewhat restrained overall inflationary pressures on consumers.
Transport contributed the most to the decrease in annual inflation. Transport inflation slowed from 5.7% in June to 3.6% in July. During the month, diesel prices fell by 8.8 pence per litre to an average of 167.6 pence, while petrol prices decreased by 3.1 pence to 152.2 pence per litre. As a result, annual motor-fuel inflation eased from 21.3% to 15.5%. Airfares also rose by 11.7% between June and July, but this increase was below the 30.2% jump observed a year earlier.
Stability in Core Inflation as Services Show Slight Decline
Core CPI inflation held steady at 2.6% in July, unchanged from June. This measure excludes energy, food, alcohol, and tobacco. Goods inflation increased from 1.7% to 2.2%, whereas services inflation decreased slightly from 3.6% to 3.4%. The overall 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 energy-related price increases, while several other underlying inflation metrics experienced only modest shifts during the month.
CPIH services inflation persisted at 3.6%, with core CPIH edging up from 2.8% to 2.9%. The largest contribution to CPIH inflation continued to come from housing and household services. Lower inflation in transport helped offset some of the upward pressure from household energy costs. Additionally, food prices added less to inflation than in previous periods. The July report clearly distinguished between categories, with gas and electricity prices boosting headline inflation, while transport and food costs moderated the overall rise in consumer prices.