Annual consumer price inflation increased to 3.8% in July, up from 3.6% in June and the strongest reading since January 2024. A 30.2% monthly surge in air fares during July was the main contributor, amplified by school holiday timing and peak summer travel demand. Hotels and restaurants rose 3.4% year on year, with city accommodation markets strained by event-driven demand. Grocery prices climbed 4.9%, led by higher coffee and chocolate costs, and rising utility bills added further pressure on households. The rise heightens challenges for fiscal stability, potentially requiring substantial tax rises or spending cuts.
Inflation climbed to its highest level in a year and a half in July, driven by surging air fares, hotel stays and grocery bills, dealing a blow to Rachel Reeves as she prepares her first autumn budget as Chancellor. The Office for National Statistics (ONS) said annual consumer price inflation rose to 3.8 per cent last month, up from 3.6 per cent in June and the sharpest reading since January 2024.
The uptick was led by an extraordinary 30.2 per cent monthly rise in air fares - the steepest July increase since comparable records began in 2001 - fuelled by school holidays and peak summer travel demand. Hotels and restaurants also contributed heavily, with prices up 3.4 per cent year on year. Analysts suggested the Oasis reunion tour had intensified pressure on city accommodation markets where the band performed.
Grocery prices climbed 4.9 per cent, their fastest pace since February, with coffee and chocolate among the biggest drivers. Rising utility bills added further pressure on households. Grant Fitzner, chief economist at the ONS, said: "The main driver was a hefty increase in air fares, the largest July rise since collection of air fares changed from quarterly to monthly in 2001. This increase was likely due to the timing of this year's school holidays."
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