UK inflation rose to 2.2% in July 2024 from 2.0% in June however core inflation fell to 3.3% from 3.5% according to the Office of National Statistics.
Food inflation has increased for the first time since March 2023, with analysis from Kantar showing supermarket prices up 1.8% in the four weeks to 4 August, up on the 1.6% rise recorded a month earlier. The increase follows 17 consecutive months of food inflation falling, having hit a peak of 17.5%.
Commenting on the data, Steve Vaid, Chief Executive of the Money Advice Trust, the charity that runs National Debtline, said “The pressure is still on for millions of households grappling with the impact of the high cost of living.
“With more than one in five UK adults seeing their financial situation worsen, it’s becoming even harder for many people to cope with everyday costs like rent and council tax.
“It’s right the Government is looking to support people who are struggling. This should include improving support under Universal Credit and a Help to Repay scheme for households with unaffordable energy debts.”
Andy Mielczarek, CEO of Chetwood Financial, said “Britons may have thought they’d seen the last of rising inflation for a while, but it has reared its head again. Hiking interest rates has succeeded in bringing us back to the target rate, but experts have been predicting some hiccups on the road to recovery. Well, here we are.
“Today’s news is not necessarily a sign that we are on the wrong path, or that there is cause to panic. Recent wage increases are hopefully helping to soften the blow of higher prices, and the promise of more base rate cuts in the near future should be a source of optimism for mortgage holders.
Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “Higher inflation has had the most highly anticipated comeback since Abba, after the Bank of England repeatedly flagged that it was on the way, and that it wasn’t anything to get inordinately concerned about. This is no Waterloo. It actually came in marginally behind expectations, because economists were pencilling in a 2.3% rise.
“It’s not massively welcome, especially for people hoping to be able to enjoy the new space in their budgets created by wage rises, but it’s not a huge upset either. It’s likely to be business as usual at the Bank of England in September, with rates on hold, so it’s unlikely to alter the picture significantly for savers and borrowers.
“Energy bills fired up the engine of inflation this month. The energy price cap actually fell £122 in July, to £1,568. However, it’s a far less significant slide than the £426 cut a year earlier. Replacing a massive cut with a smaller one in the annual figures automatically helps to push inflation up.
“It reflects the fact we’re still wrestling with far higher bills than before the cost-of-living crisis kicked off, with gas up 68% and electricity up 45% since March 2021. It’s one reason why those on below-average incomes are still well and truly trapped in the crisis. The HL Savings & Resilience Barometer shows that around a third of people still have ‘poor’ or ‘very poor’ financial resilience, and among some groups the figure is even more striking – nine out of ten single parents on low incomes scored poorly for their finances.
“Food inflation stayed low and level at 1.5%. It’s largely a reversion to typical food inflation, but after easing for more than a year, the first month when this didn’t happen is a trend to watch. It’s notable that milk, cheese and eggs were up in price, because these products have such a short shelf life that rising prices in the supply chain tend to get passed on more quickly than elsewhere in the supermarket. We will have to see whether this is a short-term blip, or whether the impact will spread further next month.
“It was a mixed bag across the shelves, so its impact will depend on what you buy. The biggest risers in the supermarket were olive oil at 37.5% and cocoa and hot chocolate at 19.6% – both victims of difficult harvests. Meanwhile, the biggest annual price drops were for frozen seafood – down 8.1% and jams, marmalade and honey, down 5.4%, which is excellent news for fictional bears.
“One factor helping keep rising inflation to a minimum was petrol prices. The average petrol price fell 14.4p per litre in a month to 144.4p per litre. Diesel was down 1.1p to 150.4p per litre, thanks to weak oil prices. It’s largely a demand-driven change, with traders concerned about a slowdown in China and economic weakness in the US, which could mean lower demand for oil in the coming months. However, overall, petrol prices were up 3.6% in a year, so motorists are still being stretched at the petrol pump. This hasn’t been helped by the fact the supermarkets are padding their margins on the forecourt, so they can manage prices more keenly on the shelves at a time when fickle shoppers are a flight risk.
“The Bank of England was expecting a rise in inflation. It means this isn’t going to trigger a U-turn on Threadneedle Street, and we’re very unlikely to see rate cuts reversed in September – especially given the fall in core inflation.
“Mortgage borrowers on tracker rates are likely to have to wait for the next cut in their monthly payments. It was always going to take longer for rates to unwind than they did to build, but those whose finances are stretched to breaking point could be forgiven for getting increasingly impatient.
“For those looking for a new fixed rate, or with a remortgage looming, the news is better. Mortgage rates have eased in recent weeks. Moneyfacts figures show the average two-year fixed rate mortgage is now at 5.67% – having dropped from a recent high of 5.97% at the end of June. They may well drift further south in the coming weeks, but expected rate cuts have already been largely priced in, so we can’t look forward to any major falls just yet.”