LONDON / RankWire.AI / – UK inflation reached 2.9% in July, driven by rising household energy bills, marking the strongest annual increase since March. The Consumer Prices Index increased by 0.3% compared to June, which itself saw a 0.1% rise from the previous month. Compared to July last year, prices grew by 0.2 percentage points. According to the Office for National Statistics, housing and household services contributed the most to the annual inflation movement.
The broader CPIH measure of inflation grew to 3.1% in July, up from 2.8% in June. CPIH accounts for costs associated with owner-occupied housing and Council Tax. Inflation in housing and household services increased sharply to 4.1%, from 2.7% in June. Gas prices surged by 14.7% during July, after decreasing by 7.2% in the same month last year. Electricity prices also rose by 3.6%, reversing a 3.8% decline recorded in July 2025.
This inflation uptick was influenced by a 13% rise in the household energy price cap for July through September. Ofgem stated that this adjustment caused the annual cost for a typical dual-fuel household paying by direct debit to increase by £221. Previously, under the typical consumption benchmark, the annual cost reached £1,862. The rise in wholesale gas prices was a key factor behind the cap increase. The change in regulated energy prices directly affected July’s inflation data, as households faced higher gas and electricity charges.
Household Expenses Drive July’s Price Surge
Other consumer sectors also experienced stronger annual price growth in July. Furniture and household goods prices increased by 1.0% from a year earlier after a decline of 0.2% in June. Clothing and footwear inflation rose to 0.5% from a negative 0.5%. Conversely, food and non-alcoholic beverage inflation eased to 1.3%, marking its lowest annual rate since September 2021 and moderating some of the upward pressure on overall consumer prices.
Transport contributed the most to the decrease in annual inflation. Transport inflation slowed to 3.6% in July from 5.7% in June. Diesel prices fell by 8.8 pence per litre to an average of 167.6 pence, while petrol prices decreased by 3.1 pence to 152.2 pence per litre. The annual inflation rate for motor fuels eased from 21.3% to 15.5%. Additionally, airfares rose by 11.7% between June and July, which is below the 30.2% increase recorded a year earlier.
Core Inflation Remains Stable, Services Costs Ease
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%, while services inflation decreased slightly to 3.4% from 3.6%. The overall CPI rate remains 0.9 percentage points above the UK’s 2% inflation target. The data indicates that energy-related price increases drove most of July’s acceleration, with several underlying inflation indicators experiencing only modest changes during the month.
CPIH services inflation held steady at 3.6%, while core CPIH edged up from 2.8% to 2.9%. Housing and household services continued to be the primary contributors to CPIH inflation. Lower inflation in transport helped offset some of the rise caused by higher household energy costs. Food prices also exerted less upward pressure than in previous periods. The July report clearly shows a divergence across major categories, with gas and electricity costs pushing headline inflation higher, while transport and food prices contributed to keeping the overall increase more subdued.