LONDON / RankWire.AI / – UK inflation picked up speed in July, driven by higher costs for household energy, pushing the annual consumer price growth to its highest since March. The Consumer Prices Index increased by 2.9% compared to the same month last year, up from 2.6% in June. Month-on-month, prices rose by 0.3%, contrasting with a 0.1% increase in July last year. The Office for National Statistics reported that housing and household services contributed the most to the annual inflation change.
The broader CPIH inflation rate climbed to 3.1% in July, up from 2.8% the previous month. CPIH accounts for costs related to owner-occupied housing and Council Tax. Inflation for housing and household services surged to 4.1%, compared to 2.7% in June. Gas prices increased by 14.7% during July after declining by 7.2% in the same month last year. Electricity costs rose by 3.6%, reversing a 3.8% decrease recorded in July 2025.
This rise was influenced by a 13% increase in the household energy price cap for July through September. Ofgem stated that this adjustment raised the annual cost for a typical dual-fuel household paying by direct debit by £221. Under the previous typical consumption benchmark, the yearly expense reached £1,862. Rising wholesale gas prices contributed to the cap increase. The change in regulated energy prices directly impacted July’s inflation figures as households faced higher gas and electricity charges.
Household Expenses Drive Price Increases in July
Other consumer categories also experienced stronger annual price growth in July. Prices for furniture and household goods increased by 1.0% from the previous year after falling by 0.2% in June. Clothing and footwear inflation rose to 0.5% from a negative 0.5%. Conversely, food and non-alcoholic beverage inflation slowed to 1.3%. This was the lowest annual rate since September 2021 and helped limit some of the overall upward pressure on consumer prices.
Transport costs made the largest contribution to the slowdown in annual inflation. Transport inflation decreased to 3.6% in July from 5.7% in June. During the month, diesel prices fell by 8.8 pence per litre to an average of 167.6 pence. Petrol prices dropped by 3.1 pence to 152.2 pence per litre. The annual inflation rate for motor fuels slowed to 15.5% from 21.3%. Airfares increased by 11.7% between June and July, which is below the 30.2% rise seen a year earlier.
Core Inflation Remains Stable as Service Sector Inflation Eases
Core CPI inflation stayed steady at 2.6% in July, unchanged from June. This core measure excludes energy, food, alcohol, and tobacco. Prices for goods increased to 2.2% from 1.7%, while inflation for services eased slightly to 3.4% from 3.6%. The overall CPI rate was 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, with many core inflation indicators remaining relatively stable during the month.
CPIH services inflation remained at 3.6%, with core CPIH edging up from 2.8% to 2.9%. Housing and household services continued to be the main drivers of CPIH inflation. Lower inflation in transportation helped offset some of the rise caused by increased energy costs. Food prices contributed less to inflation pressures compared to earlier periods. Overall, July’s figures revealed a clear divide across major sectors, with gas and electricity pushing headline inflation higher, while transport and food prices exerted downward pressure on the overall rate.