Consumer price inflation, UK: July 2023

• The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 6.4% in the 12 months to July 2023, down from 7.3% in June.
• On a monthly basis, CPIH fell by 0.3% in July 2023, whereas it rose by 0.6% in July 2022.

• The Consumer Prices Index (CPI) rose by 6.8% in the 12 months to July 2023, down from 7.9% in June.

• On a monthly basis, CPI fell by 0.4% in July 2023, compared with a rise of 0.6% in July 2022.

• Falling gas and electricity prices provided the largest downward contributions to the monthly change in CPIH and CPI annual rates; food prices rose in July 2023 but by less than in July 2022, also leading to an easing in the annual inflation rates.

• Hotels and passenger transport by air were the classes that provided the largest offsetting upward contributions to the change in the rate.

• Core CPIH (excluding energy, food, alcohol and tobacco) rose by 6.4% in the 12 months to July 2023, the same rate as the 12 months to June 2023; the CPIH goods annual rate slowed from 8.5% to 6.1%, while the CPIH services annual rate was 6.5%, up from 6.3% in June.

• Core CPI (excluding energy, food, alcohol and tobacco) rose by 6.9% in the 12 months to July 2023, unchanged from June; the CPI goods annual rate slowed from 8.5% to 6.1%, while the CPI services annual rate rose slightly from 7.2% to 7.4%.

The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 6.4% in the 12 months to July 2023, down from 7.3% in June, and down from a recent peak of 9.6% in October 2022. Our indicative modelled consumer price inflation estimates suggest that the October 2022 rate was the highest in over 40 years (the CPIH National Statistic series begins in January 2006). The rate in July 2023 was the lowest since March 2022.

The slowdown in the annual rate between June and July 2023 was a result of prices falling by 0.3% on the month compared with a rise of 0.6% a year earlier.

The Consumer Prices Index (CPI) rose by 6.8% in the 12 months to July 2023, down from 7.9% in June, and down from a recent peak of 11.1% in October 2022. Our indicative modelled consumer price inflation estimates suggest that the October 2022 peak was the highest annual inflation rate since 1981 (the CPI National Statistic series begins in January 1997). The rate in July 2023 was the lowest since February 2022.

The easing in the CPI annual rate between June and July 2023 was a result of prices falling by 0.4% on the month compared with a rise of 0.6% a year earlier.

The main drivers of the annual inflation rate for CPIH and CPI are the same where they are common to both measures. However, the owner occupiers' housing costs (OOH) component accounts for 16% of the CPIH and is the main driver for differences between the CPIH and CPI inflation rates. This makes CPIH our most comprehensive measure of inflation. We cover this in more detail in Section 4: Latest movements in CPIH inflation of this bulletin, and provide a commentary on the CPI in Section 5: Latest movements in CPI inflation. We also cover both CPIH and CPI in Section 3: Notable movements in prices, though the figures generally reflect CPIH.

The easing in the annual inflation rates in July 2023 principally reflected price changes in the housing and household services division, particularly for gas and electricity. There were also notable downward effects from food and non-alcoholic beverages, particularly from milk, bread and cereals. Hotels and passenger transport by air provided the largest offsetting upward contributions to the change in the annual rate.

Housing and household services

The Consumer Prices Index including owner occupiers' housing costs (CPIH) annual inflation rate for housing, water, electricity, gas and other fuels was 5.4% in July 2023, down from a peak of 11.8% in January and February 2023 and 7.3% in June 2023. The Consumer Prices Index (CPI) annual inflation rate for housing, water, electricity, gas and other fuels was 6.8% in July 2023, down from a peak of 26.7% in January 2023 and 12.0% in June 2023. This fall is largely because of the lowering of the Office of Gas and Electricity Markets (Ofgem) price cap in July 2023.

The main driver behind the change was gas, with monthly prices falling by 25.2% between June and July this year, compared with a rise of 0.1% between the same two months a year ago. This is the highest recorded fall in the price of gas since the series began in 1988 and meant that gas provided a downward contribution of 0.44 percentage points to the monthly change in the CPIH annual rate. Electricity also provided a substantial downward contribution, with prices falling by 8.6% between June and July this year, compared with a rise of 0.4% between the same two months a year ago. This meant that electricity provided a downward contribution of 0.20 percentage points to the monthly change in the CPIH annual rate.

Other categories provided an offsetting positive contribution to the monthly change in the CPIH annual rate. Actual rentals for housing rose by 1.7% between June and July this year compared with a 0.8% rise between the same two months a year ago. This provided an upward contribution of 0.06 percentage points to the monthly change in the CPIH annual rate and was mostly from registered social landlord rents. Imputed rents rose by 0.4% between June and July this year compared with 0.3% between June and July last year, meaning it provided an upward contribution of 0.02 percentage points to the monthly change in the CPIH annual rate.

Food and non-alcoholic beverages

Food and non-alcoholic beverage prices rose by 0.1% between June and July 2023, compared with a rise of 2.3% between the same two months a year ago. This resulted in an easing in the annual rate to 14.9% in July 2023, the slowest annual rate of growth since September 2022. This is down from 17.4% in June 2023 and from a recent high of 19.2% in March 2023, which was the highest annual rate seen for over 45 years.

The easing in the annual rate was widespread, with 10 of the 11 detailed classes seeing a fall in inflation. Three of the ten classes also saw a fall in monthly price between June and July 2023. One of these categories was milk, cheese and eggs, which provided a negative contribution of 0.04 percentage points to the monthly change in the CPIH annual rate. The annual rate of this class eased to 18.7% from 22.8% in June, while its monthly rate saw a fall of 0.4%. Milk products drove the negative contribution, with the price of whole milk falling 5.8% on the month and the price of low-fat milk falling 3.2% on the month. This resulted in both items together providing a negative contribution of 0.03 percentage points to the monthly change in the CPIH annual rate.

The second-largest downward contribution came from the bread and cereals category, where the annual rate eased to 14.4% from 16.7% in June. Within this category, bread, crumpets, pizzas and breakfast cereals made the largest negative contributions to the monthly change in the CPIH annual rate.

The only category that did not provide a negative contribution to the monthly change in the CPIH annual rate was fish, where the contribution remained the same from one month to the next. Most items in this category made no difference to the monthly change in the CPIH annual rate. Canned tuna provided a small upward contribution, but this was cancelled out by the small downward contribution made by frozen fish fingers.

Transport

Transport was the only division that saw a negative annual rate, with prices falling by 2.1% in the year to July, following a fall of 1.7% in June 2023. Prices rose by 1.3% between June and July this year, compared with a rise of 1.8% between the same two months a year ago.

The negative contribution of 0.04 percentage points to the monthly change in the CPIH annual rate provided by transport was fairly small compared with other divisions. However, some categories provided strong positive or negative contributions that cancelled each other out when the whole division was taken into account.

The largest downward contribution came from motor fuels, where prices fell by 24.9% in the year to July 2023, compared with a fall of 22.7% in June. Average petrol and diesel prices stood at 143.2 and 145.2 pence per litre respectively in July 2023, compared with 189.5 and 197.9 pence per litre in July 2022. Petrol prices rose by 0.2 pence per litre between June and July 2023, compared with a rise of 5.5 pence per litre between the same two months a year ago. Diesel prices fell by 0.5 pence per litre this year, compared with a rise of 5.5 pence per litre a year ago.

The second largest downward contribution came from the purchase of vehicles. Motorcycles and bicycles, and new cars had no effect on the monthly change in the CPIH annual rate. However, used cars made a negative contribution of 0.05 percentage points. The annual rate of the price of second-hand cars eased to 2.3% from 4.6% in June, with prices falling 1.4% on the month.

The largest positive contribution came from passenger transport by air, where the annual rate rose to 29.8%, up from 26.7% in June and the largest rise since May 2023. The monthly rise in price between June and July 2023 was 25.3%, up from 22.3% between the same months in 2022. This led to passenger transport by air providing an upward contribution of 0.06 percentage points to the monthly change in the CPIH annual rate.  

Restaurants and hotels

The division with the largest positive contribution to the monthly change in the CPIH annual rate was restaurants and hotels, where the annual rate rose to 9.6% in July, up from 9.5% in June. Much of this was driven by accommodation services, which saw a 12.2% rise in the year to July, up from 11.3% in June. This led to accommodation services providing an upward contribution of 0.04 percentage points to the monthly change in the CPIH annual rate.

Figure 4 shows the annual inflation rates for the Consumer Prices Index including owner occupiers' housing costs (CPIH) all goods, and all services series, together with CPIH excluding energy, food, alcohol and tobacco (often referred to as core CPIH). The CPIH inflation rate is added for comparison.

The core CPIH annual inflation rate was 6.4% in July 2023. This is the same rate as June 2023 but is down from 6.5% in May 2023, which was the highest rate since November 1991, when it was also 6.5%.

Owner occupiers' housing costs (OOH) rose by 4.5% in the 12 months to July 2023, up from an annual rate of 4.4% last month and 3.4% a year ago. This is the highest annual rate in OOH since November 1996.

The CPIH all goods index rose by 6.1% in the 12 months to July 2023, down from 8.5% in June. The slowing in the rate has been caused by a downward contribution to the change from energy, where prices fell by 8.2% in the year to July 2023, having risen by 2.9% in the year to June. There were other smaller downward effects from non-energy industrial goods and food, alcoholic beverages and tobacco (particularly processed food and non-alcoholic beverages).

The CPIH all services index rose by 6.5% in the 12 months to July 2023, up from 6.3% in June 2023. This is the highest rate since July 1992, when it was 6.9%.

Figure 5 shows how each of the main groups of goods and services contributed to the change in the annual CPIH inflation rate between June and July 2023. To understand what has changed the inflation rate between these months, we can look at the differences between the contributions each of the 12 divisions made to the rate in June 2023 and the rate in July 2023. These differences sum to the change in the annual CPIH rate between the latest two months, that is, the easing from 7.3% to 6.4%.

The slowing in the rate into July 2023 was driven by downward contributions from seven divisions, offset partially by small upward contributions from two divisions. The slowing in the monthly CPIH rate was led by a large downward contribution from housing and household services, where prices of gas fell by 25.2% between June and July this year, but rose by 0.1% between the same two months a year ago. Prices of electricity fell by 8.6% between June and July this year but rose by 0.4% between the same two months a year ago.

Figure 6 shows the extent to which the distinct categories of goods and services have contributed to the overall annual CPIH inflation rate over the last two years. The contribution of each category to the annual rate depends on both the price movement in that category, as well as its weight. Contributions help to explain what is driving the inflation rate by expressing it as the additive sum of its parts. For any one month, when added together, the contributions from the 12 divisions sum to the overall CPIH inflation rate, for example, 6.4% in July 2023.

The largest upward contributions to the annual CPIH inflation rate in July 2023 came from housing and household services, and food and non-alcoholic beverages. The contribution from the former group was 1.71 percentage points, down from 2.27 percentage points in June, and down from a recent high of 3.70 percentage points in January this year. The contribution from the latter group has reduced for a fourth successive month, from a high of 1.76 percentage points in March to 1.39 percentage points in July.

The contribution from transport was negative for the second consecutive month. Before last month, the last negative contribution from this division was in August 2020.

Figure 7 shows the contribution of housing components to the annual CPIH inflation rate in the context of wider housing-related costs. OOH's contribution to the CPIH annual inflation rate rose from 0.72 to 0.74 percentage points between June and July 2023. There was also a 0.42 percentage point contribution from actual rentals in July 2023, up from 0.36 percentage points a month earlier. The contribution to the annual rate from Council Tax was 0.14 percentage points in July 2023, unchanged from June.

While the Consumer Prices Index including owner occupiers' housing costs (CPIH) is our lead and most comprehensive measure of consumer price inflation, the Consumer Prices Index (CPI) is based on a harmonised methodology developed by Eurostat and allows for international comparisons to be drawn. For more information on the use cases for our consumer price inflation statistics, please refer to our Measuring changing prices and costs for consumers and households, proposed updates: March 2020 article.

Figure 8 shows CPI inflation against the EU and Group of Seven (G7) countries that produce a comparable measure. Further information on international comparisons can be found in our Food and energy price inflation, UK: 2023 article, released on 23 May 2023.

Figure 9 shows the annual inflation rates for the CPI all goods, and all services series, together with CPI excluding energy, food, alcohol and tobacco (often referred to as core CPI).

Annual core CPI rose by 6.9% in the year to July 2023. This was unchanged from June but down from the 7.1% rate in May, which was the highest since the 7.2% rate in March 1992. The CPI all goods index rose by 6.1% in the year to July 2023, down from 8.5% in June. The CPI all services index rose by 7.4% in the year to July 2023, up from 7.2% and equal with May 2023, which was the highest rate since the 9.5% rate in March 1992.

As with the all-items annual inflation rates, the drivers of CPIH and CPI goods and services inflation are the same (with the exception of owner occupiers' housing costs and Council Tax, which are excluded from CPI). The drivers are discussed in more detail in Section 4: Latest movements in CPIH inflation.

Figure 10 shows how each of the main groups of goods and services contributed to the change in the annual CPI inflation rate between June and July 2023.

The slowdown in the annual CPI rate into July 2023 was driven by downward contributions to change from 8 of the 12 divisions, with the largest downward contribution coming from housing and household services. Within this division, the downward effect came mainly from gas and electricity.

Although the sizes of the contributions differ from CPIH, the main drivers to the change are the same where they are common to both measures.

Figure 11 shows the extent to which the distinct categories of goods and services have contributed to the overall annual CPI inflation rate over the last two years.

The CPIH includes extra housing components not included in the CPI. The different items included in each index mean that the largest contributions to the annual CPI inflation rate were not from the same divisions that made the largest contributions to the annual CPIH rate. The largest contribution came from food and non-alcoholic beverages (at 1.71 percentage points) and the second largest contribution came from restaurants and hotels (at 1.24 percentage points). The negative contribution from transport is present in both CPIH and CPI.

Annual inflation rate

The most common approach to measuring inflation is the 12-month or annual inflation rate, which compares prices for the latest month with the same month a year ago. In any given month, the annual rate is determined by the balance between upward and downward price movements of the range of goods and services included in the index.

Consumer price inflation

Consumer price inflation is the rate at which the prices of goods and services bought by households rise or fall. It is estimated by using price indices. For an overview of the indices and their uses, please see Consumer price indices, a brief guide: 2017.

Consumer Prices Index including owner occupiers' housing costs (CPIH)

CPIH is the most comprehensive measure of inflation. It extends the Consumer Prices Index (CPI) to include a measure of the costs associated with owning, maintaining and living in one's own home, known as owner occupiers' housing costs (OOH), along with Council Tax. Both are significant expenses for many households and are not included in the CPI.

Consumer Prices Index (CPI)

The CPI is a measure of consumer price inflation produced to international standards and is based on European regulations for the Harmonised Index of Consumer Prices. The CPI is the inflation measure used in the government's target for inflation.

The CPI is produced at the same level of detail as the CPIH in our accompanying dataset and accompanying data time series.

Retail Prices Index (RPI)

The RPI does not meet the required standard for designation as a National Statistic. In recognition that it continues to be widely used in contracts, we continue to publish the RPI, its subcomponents, and RPI excluding mortgage interest payments (RPIX). To view the all-items RPI, please see the data time series section of the inflation and price indices area of our website. The annual RPI inflation rate was 9.0% in July 2023.

The UK Statistics Authority and HM Treasury launched a consultation in 2020 on the authority's proposal to address the shortcomings of the RPI. From 2030 (at the earliest), as outlined in the UK Statistics Authority response to the consultation, the CPIH methods and data sources will be introduced into the RPI. Additionally, the supplementary and lower-level indices of the RPI will be discontinued.

Households and the cost of living

To assist individuals in understanding how the rise in inflation affects their expenditure, we have produced a personal inflation calculator. The calculator allows users to enter the amount they spend across either a reduced or a wide range of categories, to produce an estimate of their personal inflation based on those spending patterns.

Our shopping prices comparison tool shows how the average prices of items have changed over time. As a result, the number of average price series in Table 55 in our Consumer price inflation dataset has been reduced to two, covering petrol and diesel, and Table 54 has been discontinued. The average price data originally presented in these tables are currently still available as time series on our website and can be found using the four-character identifiers in Table 55.

Update on the Household Costs Indices and CPIH-consistent subgroups, UK

In our statement on the future of the Household Costs Indices in June 2022, we set out our ambitions to move our annual experimental estimates of Household Costs Indices (HCIs) onto a regular quarterly publication basis in 2023. The HCIs reflect how different types of households experience changing prices, and differ from the Consumer Prices Index including owner occupiers' housing costs (CPIH) and the Consumer Prices Index (CPI), which are based on recognised economic principles. Moving the HCIs to a quarterly publication will better support users' understanding of how rising prices and the cost of living affect different types of households. It also recognises the HCIs' unique role in our range of consumer price inflation measures.

In order to meet our objective of beginning our quarterly HCIs publication in 2023, we have temporarily suspended our publication of CPIH-consistent subgroup data, which show the CPIH and CPI rates of inflation for different household subgroups. However, we recognise that there is a current user need for these measures and, while the CPIH-consistent subgroup publication is suspended, we will publish provisional estimates for selected sub-groups based on the previous year's weights (updated for changes in total UK spending). The provisional estimates for April to June 2023 are available in Provisional CPIH and CPI-consistent inflation rate estimates for UK household groups: April to June 2023.

We are committed to an ongoing quarterly publication of the HCIs. However, in light of wider prioritisation, we will be focussing our ongoing efforts on transforming and improving our entire range of consumer price inflation measures, including the HCIs, such as through alternative data sources.

We will update our publication plans in due course and will continue to discuss these matters with our Advisory Panels for Consumer Prices (APCPs) and other stakeholders.

Weights for 2023 consumer price inflation statistics

In line with usual practice at the start of each year, the expenditure weights used in compiling the Consumer Prices Index including owner occupiers' housing costs (CPIH) and the Consumer Prices Index (CPI) were calculated using updated spending information. Normally, this would be national accounts household final consumption expenditure (HHFCE) data lagged by two years. However, because of the unprecedented events of the last few years and the larger changes seen in spending patterns, we adjusted the data so that the resulting weights were more reflective of the year immediately before use in consumer price inflation. This is in line with the procedures adopted in 2021 and 2022. More information is available in our Consumer price inflation, updating weights articles.

Alternative data sources for rail fares

We published our final Impact analysis on the transformation of consumer price statistics for rail fares on 7 February 2023. The new data and methods have been included in CPIH, CPI and RPI from the publication of the February 2023 indices on 22 March 2023. While the headline impact of new rail fares data on CPIH, CPI and RPI is negligible, these new data enable us to produce more granular statistics, offering important insights into the components driving inflation in the UK.

On 11 June 2023, a change was made to how return tickets are sold on some routes. As a result of this, we have made some necessary adjustments to our data. This is to ensure that our indices continue to reflect price changes as experienced by consumers, and not changes that arise because of changes in ticketing structures.

The technology and processes we have developed lay the foundation for our future transformation work. More information about the project and our ongoing transformation plans can be found in our updated Transformation of consumer price statistics article, released on 6 July 2023.

As usual, we welcome your feedback on our work by email to cpi@ons.gov.uk.

Treatment of the Energy Price Guarantee in consumer price inflation

On 31 October 2022, we published the conclusion of our Classification review of the Energy Price Guarantee (EPG) for domestic consumers. The payments under this scheme have been classified as subsidies on products, paid by central government to the energy suppliers in the non-financial corporations sector in the UK. The implication for consumer price inflation of the classification decision is that the EPG influences the prices that domestic consumers are charged for a unit of gas or electricity. It is these reduced unit prices that are being used in compiling the CPIH, CPI and RPI, which are therefore lower while the schemes are in operation than if the EPG had not been introduced.

Consumer price inflation historical estimates, UK, 1950 to 1988

On 18 May 2022, we published our Consumer price inflation, historical estimates, UK, 1950 to 1988 - methodology. This includes new estimates of CPIH over the period and improved estimates of CPI. These estimates (published in response to user need for a longer series) are indicative and are for analytical purposes only. They are not intended for official use and do not constitute part of the National Statistic series.

Previously, in December 2018, we published our Consumer Prices Index including owner occupiers' housing costs (CPIH) historical series: 1988 to 2004 article. This series is an official statistic rather than a National Statistic, reflecting the historical uncertainty around the back casts.

Methodology information

The consumer price indices are normally based on prices collected from outlets around the country, supplemented by information collected centrally over the internet and by phone. The figures in this publication use data collected on or around 18 July 2023.

Our Consumer price indices, a brief guide gives an overview of consumer price statistics, while our Consumer Prices Indices Technical Manual covers the concepts and methodologies underpinning the indices in more detail.

Our CPIH Compendium provides a comprehensive source of information on the CPIH, focusing on the approach to measuring owner occupiers' housing costs.

Our Users and uses of consumer price inflation statistics: July 2018 methodology includes information on the users and uses of these statistics, and the characteristics of the different measures of inflation in relation to potential use.

We have illustrated our future approach to measuring changing prices and costs for consumers and households using three "use cases", along with how they relate to the measures currently published and those under development. We have also published proposed updates in our Measuring changing prices and costs for consumers and households, proposed updates: March 2020 article.

The three cases refer firstly to the Consumer Prices Index including owner occupiers' housing costs (CPIH) as our lead measure of inflation based on economic principles. They also refer to the Household Costs Indices (HCIs) as a set of measures to reflect the change in costs as experienced by different households, and the Retail Prices Index (RPI) as a legacy measure that is required to meet existing user needs. Our Shortcomings of the RPI as a measure of inflation article describes the issues with the RPI.