LONDON / RankWire.AI / – UK inflation experienced an acceleration in July, primarily due to increased household energy bills, reaching its highest annual rate since March. The Consumer Prices Index increased by 2.9% compared to the previous year, up from 2.6% in June. Prices also saw a 0.3% rise from June to July, contrasting with a 0.1% monthly increase during the same month last year. According to the Office for National Statistics, the most significant contributions to the annual inflation rate came from housing and household services.
The broader CPIH inflation metric climbed to 3.1% in July from 2.8% in June. CPIH accounts for costs related to owner-occupied housing and Council Tax. Inflation in housing and household services surged to 4.1%, from 2.7% in June. Gas prices increased by 14.7% during July, having fallen 7.2% in the same month last year. Electricity prices rose by 3.6%, reversing a 3.8% decline recorded in July 2025.
The rise followed a 13% increase in the household energy price cap for July through September. Ofgem indicated that this adjustment resulted in an additional £221 annually for a typical dual-fuel household paying by direct debit. Under the previous typical consumption benchmark, the annual cost reached £1,862. The increase was partly driven by higher wholesale gas prices, which contributed to the cap adjustment. As a consequence, regulated energy prices directly impacted July’s inflation data, as households faced higher gas and electricity charges.
Household expenses dominate July inflation increase
In addition to energy, several other consumer categories experienced stronger annual price rises in July. Furniture and household goods prices grew 1.0% compared to the previous year, after a 0.2% decline in June. Inflation in 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, which helped temper some upward pressure on overall consumer prices.
Transport contributed the most to the decline in the annual inflation rate. Inflation within the transport sector slowed to 3.6% in July, down from 5.7% in June. Diesel prices decreased by 8.8 pence per litre during the month, averaging 167.6 pence. Petrol prices also fell by 3.1 pence to 152.2 pence per litre. The annual inflation rate for motor fuels dropped to 15.5% from 21.3%. Meanwhile, airfares increased by 11.7% from June to July, although this was below the 30.2% rise recorded a year earlier.
Stable core inflation amidst easing services sector
In July, core CPI inflation remained steady at 2.6%, unchanged from June. This core measure excludes energy, food, alcohol, and tobacco. Goods inflation increased to 2.2% from 1.7%, while services inflation declined 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-related increases primarily drove July’s inflation acceleration, with many underlying inflation indicators only changing modestly during the period.
CPIH services inflation held at 3.6%, while core CPIH edged up from 2.8% to 2.9%. Housing and household services continued to be the dominant contributors to CPIH inflation. Lower inflation in transport helped counterbalance some of the rise caused by household energy costs. Food prices also exerted less pressure than in previous months. The July report thus revealed a clear disparity across major categories, with gas and electricity pushing headline inflation higher, while transport and food prices constrained the overall increase.