LONDON / RankWire.AI / – UK inflation increased in July, driven by higher household energy bills that pushed consumer prices to their strongest year-over-year growth since March. The Consumer Prices Index rose by 2.9% compared to the same period last year, up from 2.6% in June. Monthly prices saw an increase of 0.3%, contrasting with a 0.1% rise in July of the previous year. The Office for National Statistics reported that housing and household services contributed the most to the annual inflation change.
The broader CPIH measure of inflation grew to 3.1% in July from 2.8% in June. CPIH accounts for expenses related to owner-occupied housing and Council Tax. Inflation within housing and household services jumped sharply to 4.1%, compared to 2.7% in June. Gas prices increased by 14.7% during July after dropping 7.2% in the same month last year. Electricity costs rose by 3.6%, reversing a 3.8% decline recorded in July 2025.
This increase followed a 13% rise in the household energy price cap for July through September. Ofgem explained that this adjustment raised the annual cost for an average dual-fuel household paying by direct debit by £221. Under the previous typical consumption benchmark, the annual cost reached £1,862. The rise was largely due to higher wholesale gas prices, which contributed to the cap increase. The change in regulated energy tariffs directly impacted the July inflation figures as households faced increased gas and electricity charges.
Household expenses drive July’s inflation surge
In addition to energy, several other consumer sectors experienced stronger annual price increases in July. Prices for furniture and household goods rose by 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 eased to 1.3%, marking the lowest annual rate since September 2021, which helped limit some of the overall upward pressure on consumer prices.
Transport contributed the most to the reduction in annual inflation. Inflation within the transport category slowed to 3.6% in July from 5.7% in June. Diesel prices decreased by 8.8 pence per litre during the month to an average of 167.6 pence, while petrol prices dropped by 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 by 11.7% between June and July, which was below the 30.2% rise recorded a year earlier.
Core inflation remains stable as services inflation declines
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 eased slightly to 3.4% from 3.6%. The headline CPI rate was 0.9 percentage points above the UK’s target of 2%. The data indicated that much of July’s acceleration was driven by increases in energy prices, with several underlying inflation measures changing only modestly during the month.
CPIH services inflation remained at 3.6%, while core CPIH edged higher to 2.9% from 2.8%. Housing and household services continued to contribute the most to CPIH inflation. Lower inflation in transport helped offset some of the rise caused by household energy costs. Food prices also exerted less upward pressure compared to previous periods. Overall, the July report showed a clear division among major categories, with gas and electricity prices boosting headline inflation, while transport and food prices restrained the overall increase.