UK inflation climbed to 2.9% in July, up from 2.6% in June, largely driven by an increase in energy bills. This rise follows an increase in Ofgem’s quarterly price cap coming into force.
While cheaper fuel prices initially offered some offset due to easing hostilities in the Middle East, fuel prices have recently risen again. Consumers are also facing the prospect of another increase in the Ofgem price cap for household energy bills in Great Britain, expected in October.
Prime Minister Andy Burnham's decision to cut VAT from electricity bills aims to alleviate pressure on household budgets. However, this measure risks being overshadowed by broader price increases.
Food prices saw an annual increase of 1.3% in July, down from 1.7% the previous month. However, the Food and Drink Federation's chief economist, Liliana Danila, stated that supply chain disruption and extreme weather will continue to pressure ingredient prices, making it difficult for manufacturers to shield consumers from further rises.
The TUC general secretary, Paul Nowak, has called for more government action to support households in the coming months due to rising energy bills and inflation. Chancellor John Healey is currently weighing the cost of energy support for households, while also contending with higher borrowing costs for the government.