The key reason why services inflation rose by less than expected is that the cost of hotel accommodation fell significantly year-on-year, driven in part by the end of Taylor Swift’s UK-wide tour.
Prices in restaurants and hotels fell by 0.4pc from June to July, with the reduction driven almost entirely by the latter. While on an annual basis prices across this category are still up 4.9pc, this represents the lowest increase since January 2022.
Elsewhere, the overall headline rate ticked up after energy costs fell by less in July than a year earlier, driven largely by gas prices. While monthly gas prices fell by 7.8pc in July, it pales in comparison to the 25.2pc drop a year earlier.
Philip Shaw at Investec said: “The most significant factor behind the strengthening in the headline rate of inflation was gas and electricity prices.
“Helping to mitigate this was a more modest monthly increase in airfares than a year ago and a drop in accommodation prices, the latter perhaps reflecting the end of Taylor Swift’s Eras UK tour.”
However, for many families, life will still feel a lot more expensive than before, particularly as foods like milk, cheese and eggs continue to rise. The same goes for fruit.
Another measure of inflation showed that homeowners faced an increase of 7pc in housing costs in the year to July. This is the sharpest annual rise since March 1992 and underlines how the pain from higher mortgage rates continues to feed through to homeowners.