Inflation hit 3.8% for the 12 months to July, up from 3.6% the previous month and above previous forecasts of the measure.
The Consumer Prices Index (CPI) had been expected rise to 3.7%. The new rate is the highest in more than 18 months with the rate last higher in January 2024 when it reached 4.0%.
It follows a warning by the Bank of England earlier this month that inflation could hit 4% by September.
Besides transport, which was the biggest influencer on rising prices, food inflation also drove inflation up. Food inflation rose to 4.9% in July, up from 4.5% in June and rising by 1.9 percentage points in four months. The increase is the fourth consecutive rise and the highest rate since February 2024.
Responding to the ONS figures, Kris Hamer, director of insight at the British Retail Consortium, said: “Households are once again seeing the cost of their weekly shop climb, with food inflation now up by 1.9 percentage points in just four months. This surge has been a key driver behind headline inflation, alongside a rise in transport costs, piling fresh pressure on families already being forced to cut back.”
Government policies fuelling price rises
“The Bank of England has been clear that government policies, which have driven up the costs of employment, are fuelling price rises at the till, while poor harvests and global instability have also added further cost pressures. There was some limited relief for consumers as clothing and footwear inflation remained subdued while certain everyday food items such as olive oil, butter and cheese did fall in price on the month.”
Although he said that retailers had been working hard to prevent price rises he said they were now likely to be inevitable. “The swathe of costs they now face has left them no room to manoeuvre. The recent administration of Claire’s Accessories is yet more evidence of the pressure the industry is currently facing. The Chancellor must avoid burdening the industry with even more taxes this autumn. Instead, she has an opportunity to encourage much needed investment in our high streets by ensuring the planned reforms to business rates offer a significant reduction for retail properties and leave no shop paying more.”
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