UK Inflation Heats Up Again in July

UK inflation accelerated in July as higher household energy costs pushed consumer prices higher.

The increase was concentrated in several key categories, while food and transport inflation eased and factory-gate price growth slowed.

Energy Drives CPI Higher

Annual inflation rose to 2.9% in July from 2.6% in June, reaching a four-month high and matching expectations. Monthly CPI increased 0.3%, also in line with forecasts.

Other categories offered some relief:

Transport inflation: 3.6%, down from 5.7%, helped by lower diesel prices
Food inflation: 1.3%, down from 1.7%
Goods inflation: 2.2%, up from 1.7%
Services inflation: 3.4%, down from 3.6%

Housing and household services provided the biggest upward push, rising 4.1% year-on-year as gas and electricity costs increased. Furniture, household goods, and clothing prices also rebounded.

Core Inflation Stays Firm, Producer Prices Cool

Core inflation held at 2.6% for a third straight month, its highest since March and slightly above the 2.5% forecast. On a monthly basis, core prices rose just 0.2%, the smallest increase since January.

Producer prices told a softer story. Factory-gate inflation slowed to 3.1% year-on-year, a four-month low, from 3.5% in June and below the 3.2% forecast. Monthly prices rose 0.2%, matching expectations.

Coke and refined petroleum products remained the largest upward contributor, rising 30.1%, but slowed sharply from 41.3% in June. Motor vehicles and transport equipment fell 1.6%, providing the biggest downward contribution.

July’s figures leave the UK with stronger headline inflation but softer services and producer price growth, adding another layer to the Bank of England’s rate outlook.

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