Barclays Research has projected that UK consumer price inflation will edge up to 3.7% year over year in July, a slight increase from June’s 3.6%, according to a note released recently. This uptick is driven by higher prices across key categories such as food, hotels, and motor fuels, reflecting persistent inflationary pressures in the economy. The bank’s revised tracking data shows a 0.2 percentage point rise from its earlier monthly forecast, placing the July figure just below the latest projection from the Bank of England.
Core CPI, which excludes volatile food and energy prices, is expected to remain steady at 3.7% year over year. Within this measure, non-energy industrial goods inflation is set to slow to 1.7%, a trend attributed to weaker clothing and footwear prices as well as monthly declines in both durable and non-durable goods. This moderation in goods inflation is offset, however, by sustained strength in services prices.
Services inflation is projected to reach 4.8% year over year, supported by stronger-than-anticipated hotel prices amid peak summer travel demand and higher costs for water, sewerage, and transport services. A notable contributor here is airfares, which rose 12.6% month over month in July, adding significant upward pressure to the overall services component as travelers rush to take advantage of summer holidays.
Food, alcohol, and tobacco prices are forecast to climb 5% year over year, with processed food prices rising 5.4% and unprocessed food prices up 3.9%. Recent retail data has indicated a sharper acceleration in these categories than previously expected, pointing to ongoing supply chain adjustments and lingering input cost pressures that continue to filter through to consumer prices.
Energy prices are expected to edge up 0.2% from a year earlier, with a 1.5% rise in pump prices counteracting the impact of the 7% cut in the Ofgem price cap. This balance highlights the interplay between regulated energy tariffs and market-driven fuel costs, which together contribute to the overall inflation picture.
Barclays’ forecast for the retail price index (RPI) stands at 405.3 in July, equivalent to a 4.59% annual increase and a 0.20% monthly rise, slightly below market expectations. The bank notes that inflation from mortgage interest payments is continuing to ease, while seasonal factors are boosting housing depreciation. Meanwhile, transport-related categories, particularly travel costs, are set to add to the monthly RPI gain, with fares up 9% on the month as summer travel demand peaks.
Overall, the July inflation outlook underscores the persistence of price pressures in areas tied to consumer spending patterns, from essential food items to discretionary travel. While some components show signs of moderation, the broader trend suggests that inflation remains a key economic challenge, with implications for household budgets, business pricing strategies, and monetary policy considerations moving forward.
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