LONDON / RankWire.AI / – UK inflation picked up pace in July, largely influenced by rising household energy expenses, 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. Month-on-month, prices grew by 0.3%, a noticeable rise from the 0.1% monthly increase recorded in July 2022. The Office for National Statistics highlighted that housing and household services were the main contributors to this annual inflation boost.
Meanwhile, the broader CPIH inflation rate advanced to 3.1% in July from 2.8% in June. This measure incorporates costs related to owner-occupied housing and Council Tax. The inflation rate for housing and household services surged to 4.1%, compared to 2.7% in June. Gas prices climbed 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 noted in July 2025.
This uptick coincided with a 13% increase in the household energy price cap for July through September. Ofgem explained that this adjustment caused the annual cost for a typical dual-fuel household paying by direct debit to rise by £221. Under the previous typical-consumption benchmark, the annual cost reached £1,862. The increase was driven by higher wholesale gas prices, which contributed to the cap rise. As a result, regulated energy prices directly impacted July’s inflation figures, with households facing higher gas and electricity bills.
Household Expenses Are Primary Driver of July Price Rise
In addition to energy, several other consumer categories experienced stronger annual price increases in July. Prices for furniture and household goods increased by 1.0% year-on-year after falling by 0.2% in June. Clothing and footwear inflation moved up to 0.5% from negative 0.5%. Conversely, food and non-alcoholic beverage prices eased to 1.3%, marking the lowest annual rate since September 2021 and tempering some of the overall upward pressure on consumer prices.
Transport costs contributed the most to dampening the annual inflation rate. Inflation in transport slowed to 3.6% in July from 5.7% in June. During the month, diesel prices dropped by 8.8 pence per litre to an average of 167.6 pence, while petrol prices declined by 3.1 pence to 152.2 pence per litre. Motor fuel inflation eased from 21.3% to 15.5% annually. Additionally, airfares increased by 11.7% between June and July, but this was significantly lower than the 30.2% rise seen a year earlier.
Core Inflation Stable as Service Sector Growth Moderates
Core CPI inflation held steady at 2.6% in July, the same as in June. This core measure excludes energy, food, alcohol, and tobacco. Goods prices increased to 2.2% from 1.7%, while service inflation slightly decreased to 3.4% from 3.6%. The overall CPI rate remains 0.9 percentage points above the UK’s 2% inflation target. The report indicates that much of July’s acceleration was driven by energy-related price increases, with underlying inflation measures showing only modest changes throughout the month.
CPIH services inflation was steady at 3.6%, while core CPIH edged up from 2.8% to 2.9%. The most significant contribution to CPIH inflation continued to come from housing and household services. Lower inflation in transport helped offset some of the impact from rising household energy costs. Food prices also contributed less than previously, resulting in a noticeable division across major categories—gas and electricity pushing headline inflation higher, while transport and food prices moderated the overall increase.