LONDON / RankWire.AI / – UK inflation saw an uptick in July, driven largely by escalating household energy expenses that pushed consumer prices to their highest annual rate since March. The Consumer Prices Index climbed 2.9% compared to the previous year, up from 2.6% in June, with a monthly increase of 0.3%. This contrasts with a 0.1% rise in July last year. According to the Office for National Statistics, the most significant contributors to this annual inflation shift were housing and household services.
Meanwhile, the broader CPIH inflation measure grew to 3.1% in July from 2.8% the month before, as it encompasses costs related to owner-occupied housing and Council Tax. Inflation within housing and household services surged sharply to 4.1%, compared with 2.7% in June. Gas prices increased by 14.7% in July, following a 7.2% decline in the same period last year, while electricity prices rose by 3.6%, reversing a 3.8% decrease recorded in July 2025.
This rise coincided with a 13% increase in the household energy price cap for July through September. Ofgem reported that this adjustment resulted in an additional £221 annually for an average dual-fuel household paying via direct debit. Under the previous typical consumption benchmark, the annual cost reached £1,862. The cap increase was influenced by rising wholesale gas prices, which directly impacted regulated energy costs and, consequently, the inflation figures for July as households faced higher gas and electricity bills.
Household Expenses Drive Inflation in July
In addition to energy, several other sectors experienced stronger year-on-year price increases in July. Prices for furniture and household goods went up by 1.0% from a year prior, reversing a 0.2% decline in June. Clothing and footwear inflation rose to 0.5%, from a negative 0.5%. Conversely, food and non-alcoholic beverage prices eased to 1.3%, marking their lowest annual growth rate since September 2021, thus tempering some of the overall upward pressure on consumer prices.
Transport contributed the most to the reduction in the annual inflation rate, with transport inflation slowing 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, and petrol prices dropped by 3.1 pence to 152.2 pence per litre. The annual inflation rate for motor fuel decreased to 15.5%, from 21.3%. Additionally, airfares increased by 11.7% between June and July, which is below the 30.2% rise seen a year earlier.
Core Inflation Remains Stable as Service Prices Slightly Decrease
Core CPI inflation stayed 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 edged down to 3.4% from 3.6%. The overall CPI inflation rate was 0.9 percentage points above the UK’s target of 2%. The data indicates that energy price increases mainly drove July’s acceleration, with other underlying inflation metrics exhibiting only modest changes throughout the month.
CPIH services inflation remained at 3.6%, while core CPIH slightly increased from 2.8% to 2.9%. The most significant contribution to CPIH inflation continued to come from housing and household services. A decline in transport inflation helped offset some of the inflationary pressure from rising household energy costs. Additionally, food prices contributed less to overall inflation than in previous periods. The July report thus highlighted a clear division across major categories, with gas and electricity pushing headline inflation higher, while transport and food prices exerted a moderating effect on the overall increase.