96% of UK households report rises in cost of food shop, ONS data shows
Food and energy prices drive inflation to G7-high levels as Bank of England signals uncertainty over timing of rate cuts
Nearly all UK households reported paying more for their weekly food shop last month, with the Office for National Statistics saying 96% of households saw prices rise — the highest share in two years.
The rise in food costs has contributed to broader inflationary pressure: overall consumer price index inflation stood at 3.8% in July, the ONS figures show, a rate the Bank of England has said could reach 4% later this year and which is the highest among G7 economies.
Manufacturers and industry groups cited a range of factors pushing up food and drink prices, including higher energy and ingredients costs, a packaging tax and the recent increase in employer National Insurance contributions introduced by the Labour government, which some firms have passed on to customers.
The ONS also reported that 55% of households experienced higher gas or electricity bills in the past month, a share the statistics agency described as the lowest since September last year. Officials and analysts warn, however, that another rise in household energy costs is expected next month after the regulator increased the energy price cap. The regulator said the cap rise reflected higher system costs, including the rising expense of so-called constraint payments to wind farms when they are asked to switch off because the grid cannot accept additional generation.
The combination of elevated food and energy prices has complicated the Bank of England’s path for monetary easing. Governor Andrew Bailey said last week there was “considerably more doubt” about when further interest rate cuts would be made amid the rising inflation pressures. Financial markets and some forecasters have already pushed back expectations for cuts.
HSBC economists this week said they now expect no further Bank of England rate cuts until next April, citing the stronger-than-anticipated persistence of inflationary drivers such as food and energy costs.
The ONS data underscores the squeeze on household budgets across income groups, with higher everyday bills eroding real incomes even as wage growth has been relatively robust in some sectors. Economists say the mix of tax policy, supply-side cost pressures and energy market quirks is likely to keep inflation elevated in the near term, complicating decisions for policymakers charged with balancing price stability and economic growth.
Retailers and consumer groups have urged targeted measures to ease cost pressures on the most vulnerable households, while industry bodies have called for greater clarity on tax and regulatory changes that affect manufacturing and food supply chains. The ONS figures will be closely watched by the Bank of England and the Treasury as they assess the outlook for prices and the timing of any future interest-rate moves.