LONDON / RankWire.AI / – UK inflation picked up pace in July, driven by increasing household energy costs, reaching its highest annual growth since March. The Consumer Prices Index increased by 2.9% compared to the previous year, up from 2.6% in June. Prices also rose by 0.3% month-on-month, contrasting with a 0.1% monthly rise in July last year. The Office for National Statistics indicated that housing and household services contributed most significantly to the annual inflation change.
The broader CPIH measure of inflation went up to 3.1% in July, from 2.8% in June. CPIH includes costs related to owner-occupied housing and Council Tax. Inflation for housing and household services jumped to 4.1% from 2.7% in June, with gas prices rising 14.7% in July after falling 7.2% in the same month last year. Electricity costs increased 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 reported that this adjustment increased the annual expense for an average dual-fuel household paying by direct debit by £221. The previous typical consumption benchmark put the yearly figure at £1,862. Rising wholesale gas costs played a role in the cap’s increase, and this change in regulated energy prices directly contributed to July’s inflation figures as households faced higher gas and electricity charges.
Household expenses drive July’s inflation increase
Other consumer categories also experienced stronger annual price gains in July. Furniture and household goods prices increased 1.0% year-on-year after a 0.2% decline in June. Clothing and footwear inflation rose 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 tempering some of the broader upward pressure on consumer prices.
Transport contributed most to the downward shift in annual inflation. Transport inflation decreased to 3.6% in July from 5.7% in June. Diesel prices fell by 8.8 pence per litre on average to 167.6 pence, while petrol prices dropped 3.1 pence to 152.2 pence per litre. Annual inflation for motor fuels eased to 15.5% from 21.3%. Airfares increased 11.7% between June and July, but this was below the 30.2% rise seen a year earlier.
Core inflation remains steady as services slow
Core CPI inflation stayed 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%, whereas services inflation eased slightly to 3.4% from 3.6%. The headline CPI rate is now 0.9 percentage points above the UK’s 2% inflation target. The data indicates that much of July’s acceleration was driven by energy costs, while many underlying inflation indicators showed only modest changes during the month.
CPIH services inflation remained at 3.6%, with core CPIH edging up to 2.9% from 2.8%. Housing and household services continued to be the largest contributors to CPIH inflation. Lower transport inflation offset some of the upward pressure from household energy costs. Food prices contributed less to inflation than in previous periods. Overall, the July report reveals a split among major categories, with gas and electricity pushing headline inflation higher, while transport and food exerted some restraint on the overall increase.