2026-08-19
Britain’s annual consumer inflation rate picked up in July, and the price category that includes alcohol and tobacco also moved higher, adding to pressure on household spending and giving drinks producers and retailers another signal that costs are still passing through the market.
The Office for National Statistics said the Consumer Prices Index including owner occupiers’ housing costs, the broadest measure of inflation it publishes, rose 3.1% in the 12 months through July, up from 2.8% in June. The standard Consumer Prices Index rose 2.9%, up from 2.6%. On a monthly basis, both measures increased 0.3% in July.
Within the consumer basket, alcohol and tobacco prices rose 2.5% from a year earlier, up from 2.1% in June. They increased 0.2% on the month. That compared with annual inflation of 1.3% for food and non-alcoholic beverages, which slowed from 1.7% in June and was the lowest rate since September 2021.
The ONS said this was the first time since March that the annual rates for both CPIH and CPI had increased. The main upward pressure came from housing and household services and from furniture and household goods, while transport provided the biggest offset.
Housing and household services inflation reached 4.1% in July, up from 2.7% in June. Prices in that division rose 0.9% on the month, compared with a 0.4% decline in the same month last year. The ONS said gas and electricity were the main factors. Gas prices rose 14.7% in July, compared with a 7.2% fall a year earlier, while electricity prices rose 3.6% after a 3.8% fall in July 2025.
The increase followed a change in the energy price cap set by Ofgem. The regulator estimated that the cap for an average household paying by direct debit for dual fuel implied an annual bill of £1,862, up £221. The ONS said the higher cap was driven in part by stronger wholesale energy prices and noted that the assessment period used for the July-to-September cap was the first to reflect the impact of the conflict in the Middle East.
Transport inflation, by contrast, eased sharply. Annual price growth in that category slowed to 3.6% in July from 5.7% in June. Motor fuels were the main reason. Diesel prices fell by 8.8 pence per liter between June and July, compared with a 2.9 pence increase in the same period last year. Petrol prices fell by 3.1 pence per liter, compared with a 2.0 pence increase a year earlier. Average July prices stood at 167.6 pence per liter for diesel and 152.2 pence for petrol.
Airfares also helped lower the transport rate, though the picture was mixed. European routes weakened, while long-haul fares rose more strongly. The ONS said reports have suggested that the conflict in the Middle East disrupted airspace and reduced capacity on some long-haul routes, pushing up prices. Higher jet fuel costs may also have played a role.
Core inflation was firmer. Core CPIH, which excludes energy, food, alcohol and tobacco, rose 2.9% in the year through July, up from 2.8% in June. Core CPI, which uses the same exclusions, was unchanged at 2.6%. Goods inflation under CPIH rose to 2.2% from 1.7%, while services inflation held at 3.6%.
Producer price data released alongside the consumer inflation figures showed that cost pressure inside the supply chain eased in July but did not disappear. Input prices paid by British manufacturers were 4.9% higher than a year earlier, down from a revised 7.4% increase in June. They fell 1.7% on the month. Factory gate prices, which measure what producers receive for goods sold in the domestic market, rose 3.1% from a year earlier, down from 3.5% in June, and edged up 0.2% on the month.
The ONS said the monthly producer price figures continued to be affected by the conflict in the Middle East. Crude oil made the largest contribution to the slowdown in annual input inflation after falling 18.0% on the month in July. Refined petroleum products made the largest contribution to the easing in output inflation, with prices down 2.9% from June.
For the drinks trade, the detail was mixed. Input prices for the producer category that covers beverages and tobacco rose 3.1% from a year earlier in July, down from 3.9% in June, and slipped 0.1% on the month. Factory gate prices for alcoholic beverages and tobacco products rose 1.2% on the year, slowing from 2.0% in June, and increased 0.1% on the month.
That combination matters for wine, beer and spirits companies because it suggests that some upstream cost pressure has moderated even as consumer prices in the alcohol and tobacco category continue to rise faster than food prices overall. The gap could affect retail demand, promotional activity and margin discussions between suppliers and supermarket chains in the coming months, especially as energy, packaging and transport costs remain exposed to wider market volatility.
The producer price report also showed imported materials and fuels purchased by manufacturers were up 5.2% from a year earlier, down from a revised 9.0% in June, and fell 2.5% on the month. Sterling’s effective exchange rate rose 0.6% from a year earlier and 0.9% on the month, which may offer some relief for importers if the move holds.
Food production costs were softer than some other parts of manufacturing. Output prices for food products fell 0.8% from a year earlier in July after a revised 0.6% decline in June, partly because of lower dairy and cheese prices. Domestic food input prices fell 1.6% on the year. Even so, some packaging and industrial inputs remained elevated, including chemicals and metals, both of which are relevant for bottles, cans, closures and processing equipment used across the beverage industry.
The ONS noted that June and July producer price estimates are provisional and may be revised as more survey data are received. Even with that caution, the July figures point to an inflation picture that is no longer being driven by food in the way it was in recent years, but is still being shaped by energy, transport and other costs that can filter into drink prices from the factory gate to the supermarket shelf and the restaurant menu.
On an internationally comparable CPI basis, the UK’s 2.9% inflation rate in July was above France’s flash estimate of 2.4% and slightly above Germany’s 2.8%, according to the ONS.