- Headline CPI jumped to 3.8% in July, higher than the 3.7% expected and the highest rate since January 2024
- Airfares played a significant part in the rise, up 30.2% from the previous months as school holiday price hikes kicked in
- Food inflation rose to 4.9%, the fourth consecutive increase and the highest level since February 2024
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK inflation figures:
“Households didn’t need the official data to know that many prices have been edging up again, stretching already tight budgets. Headline CPI is now at levels not seen since early 2024 and the Bank of England has warned things will get worse before inflation gradually fades back towards that elusive 2% target.
“Everyone’s inflation experience will be different, but all those parents who saved for months to take the family on a post-school break will have had first-hand experience of one of the main drivers of July’s larger than expected jump.
“It always feels unfair when you watch airfares shoot up on the first day of parents’ six-week summer window and it’s notable that with the holidays falling earlier in July this year, the cost of a week in the sun would have been subject to that school holiday premium and reflected in this month’s figures.
“Petrol prices had also edged up on the previous month and bars, restaurants and hotels all saw prices creep up, making a UK break more expensive as well. A recent survey from the UK hospitality sector and other sector industry bodies reported that 79% of those surveyed had felt compelled to put up prices due to the impact of increased labour costs.
“But it’s that weekly trip to the local supermarket which gives most of us the greatest insight into our cost of living. For the fourth month in a row food inflation has risen, up to 4.9% in July – a level not seen in more than a year.
“Meat, coffee, orange juice and chocolate were amongst the items putting the biggest pressures on budgets. With UK farmers highlighting the expected impact of a dry summer on food production, many households will be worried that it’s going to take a considerable amount of time before these higher prices unwind.
“For UK rate setters it’s the hike in service sector inflation which is likely to narrow their opportunity to cut the base rate further this year. Looking at market expectation this morning, worries that persistent inflation will continue to influence pay awards despite a cooling labour market makes it increasingly likely we’ve seen the last cut for 2025.
“With energy bills also expected to rise in the autumn and continued speculation about potential tax hikes in the upcoming Budget, caution is likely to be at the forefront of many people’s minds.
“To add further pressure to many budgets comes the expectation that rail fares could jump by a whopping 5.8% next year after July’s RPI number came in at 4.8%.”
