LONDON / RankWire.AI / – UK inflation accelerated during July as rising household energy costs pushed consumer prices to their highest annual increase since March. The Consumer Prices Index climbed 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 made the most significant upward contribution to the annual inflation change.
In July, the broader CPIH inflation measure rose to 3.1% from 2.8% in June. CPIH incorporates costs associated with owner-occupied housing and Council Tax. Inflation for housing and household services surged to 4.1%, from 2.7% in June. Gas prices increased by 14.7% in July after a 7.2% decrease during the same month last year. Electricity prices 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 stated that this adjustment added £221 annually to the typical dual-fuel household paying via direct debit. Using the previous typical-consumption benchmark, the yearly cost now totals £1,862. The cap increase was driven by higher wholesale gas prices. These regulated energy price changes directly impacted July’s inflation figures as households faced increased gas and electricity expenses.
Household expenses drive July’s inflation increase
Several other consumer sectors experienced stronger annual price growth in July as well. Prices for furniture and household goods rose 1.0% compared to the previous year 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%, marking its lowest annual rate since September 2021 and dampening some of the overall upward pressure on consumer prices.
Transport contributed the most to the decrease in the annual inflation rate. Transport inflation slowed 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, while petrol prices decreased by 3.1 pence to 152.2 pence per litre. Annual motor-fuel inflation eased to 15.5% from 21.3%. Additionally, airfares rose by 11.7% between June and July, which is below the 30.2% increase seen a year earlier.
Stable core inflation as service costs decline
Core CPI inflation stayed steady at 2.6% in July, matching June’s rate. This core measure excludes energy, food, alcohol, and tobacco. Goods inflation increased to 2.2% from 1.7%, while services inflation eased slightly to 3.4% from 3.6%. The overall CPI rate remained 0.9 percentage points above the UK’s 2% inflation target. The data indicates that much of July’s inflation acceleration was driven by energy-related increases, with several core inflation indicators changing only modestly during the month.
CPIH services inflation held at 3.6%, with core CPIH rising marginally 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 helped offset some of the pressure from rising household energy costs. Additionally, food prices exerted less upward pressure than in previous months. Overall, July’s report revealed a clear divide among major categories, with gas and electricity pushing headline inflation higher while transport and food prices restrained the overall increase.