LONDON / RankWire.AI / – UK inflation picked up speed in July, driven by increased household energy bills, reaching its highest annual rate since March. The Consumer Prices Index increased by 2.9% compared to the same month last year, up from 2.6% in June. On a monthly basis, prices grew by 0.3%, whereas July last year saw only a 0.1% rise. The Office for National Statistics explained that housing and household services contributed most significantly to the annual inflation shift.
Meanwhile, the broader CPIH inflation measure climbed to 3.1% in July from 2.8% in June. CPIH encompasses costs related to owner-occupied housing and Council Tax. Inflation in housing and household services surged to 4.1%, compared to 2.7% in June. Gas prices increased by 14.7% during July after decreasing by 7.2% in the same month last year. Electricity costs also rose by 3.6%, reversing a 3.8% decline recorded in July 2025.
This rise followed a 13% increase in the household energy price cap for July through September. Ofgem noted that this change resulted in an additional £221 annually for a typical dual-fuel household paying by direct debit. Under the previous typical consumption benchmark, the annual expense reached £1,862. Elevated wholesale gas prices played a role in the cap increase. The adjustment in regulated energy prices directly influenced July’s inflation figures, as households faced higher gas and electricity charges.
Household Expenses Drive July’s Price Rise
Other consumer categories also experienced increased annual price growth in July. Furniture and household goods prices rose by 1.0% from a year earlier after a 0.2% decline in June. Inflation for clothing and footwear increased to 0.5% from negative 0.5%. Conversely, food and non-alcoholic beverage inflation slowed to 1.3%, its lowest annual rate since September 2021, which helped temper some of the broader upward pressure on consumer prices.
Transport contributed the most significant downward impact on the annual inflation change. Transport inflation slowed to 3.6% in July from 5.7% in June. During the month, diesel prices decreased by 8.8 pence per litre to an average of 167.6 pence, while petrol prices fell by 3.1 pence to 152.2 pence per litre. The annual inflation rate for motor fuel eased to 15.5% from 21.3%. Additionally, airfares increased by 11.7% between June and July, which was below the 30.2% rise seen a year earlier.
Core Inflation Remains Stable, Services Easing
Core CPI inflation stayed steady at 2.6% in July, unchanged from June. This core measure excludes energy, food, alcohol, and tobacco. While goods inflation increased to 2.2% from 1.7%, services inflation decreased 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 energy price increases were primarily responsible for July’s acceleration, with many underlying inflation metrics showing only modest changes during the month.
CPIH services inflation remained at 3.6%, with core CPIH edging up to 2.9% from 2.8%. The largest contribution to CPIH inflation continued to come from housing and household services. A decline in transport inflation offset some of the increase from rising household energy costs. Additionally, food prices exerted less upward pressure than in previous periods. The July report clearly displayed a split across key categories, with gas and electricity pushing headline inflation higher, while transport and food prices helped restrain the overall increase.