LONDON / RankWire.AI / – UK inflation experienced an uptick in July, driven by increased household energy costs, which led consumer prices to the highest annual increase since March. The Consumer Prices Index climbed 2.9% from the same month last year, compared to 2.6% in June. Prices also rose by 0.3% compared to June, contrasting with a 0.1% monthly increase 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.
The broader CPIH inflation rate increased to 3.1% in July from 2.8% in June. CPIH accounts for costs related to owner-occupied housing and Council Tax. The inflation for housing and household services surged to 4.1%, up from 2.7% in June. Gas prices rose 14.7% during July after decreasing 7.2% in the same month last year. Electricity prices went up 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 indicated that this adjustment caused the annual cost for a typical dual-fuel household paying via direct debit to increase by £221. Under the previous typical-consumption benchmark, the annual cost reached £1,862. The increase in wholesale gas prices was a key factor behind the cap change. These regulated energy price adjustments directly impacted July’s inflation figures as households faced higher gas and electricity bills.
Household expenses drive July’s price growth
Other consumer categories also experienced heightened annual price increases in July. 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 limiting some of the overall upward pressure on consumer prices.
Transport contributed the largest downward influence on the annual inflation change. Its inflation rate 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 3.1 pence to 152.2 pence per litre. The annual inflation rate for motor fuels eased to 15.5% from 21.3%. Airfares increased 11.7% between June and July, but this rise was below the 30.2% increase seen a year earlier.
Core inflation remains stable as service costs ease
Core CPI inflation held steady at 2.6% in July, unchanged from June. This core measure excludes energy, food, alcohol, and tobacco. Goods inflation increased to 2.2% from 1.7%, while services inflation slowed 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 indicated that much of July’s inflation acceleration was driven by energy-related factors, with several underlying inflation measures changing only modestly during the month.
CPIH services inflation stayed at 3.6%, and core CPIH edged up to 2.9% from 2.8%. Housing and household services continued to be the primary contributors to CPIH inflation. A slowdown in transport inflation helped offset some of the inflationary pressure from higher household energy costs. Food prices also contributed less to overall inflation than previously. Overall, the July report highlighted a distinct divergence across major categories, with gas and electricity prices boosting headline inflation while transport and food prices moderated the overall increase.