UK inflation rises to 3.1%
Breaking news: UK inflation has risen, putting households under new financial pressure.
The consumer price index, which measures the cost of goods and services in the economy, rose to 3.1% in the year to August, up from 2.9% in July.
On a monthly basis, the consumer price index rose 0.5% in August, driven by “Transport, particularly motor fuels,” the Office for National Statistics said.
What follows….
Key events
Inflation at the factory gates is also rising
Worryingly, the cost of goods produced by UK factories rose at a faster rate in August.
Manufacturer prices – or the cost of goods at the factory gate – rose 3.7% in the year to August, up from 3.3% in July.
ONS chief economist Grant Fitzner explains:
“Rising crude oil and gasoline prices have increased both the annual cost of raw materials and the price of goods leaving refineries, respectively.”
UK inflation, at 3.1% in August, is now the highest since March, when the consumer price index hit 3.3%.
ONS chief economist Grant Fitzner speaks:
“A sharp rise in petrol and diesel prices again pushed up inflation in August. Rising airfare prices, especially for long-haul flights, also contributed to this growth.
Airfare prices have also increased
According to the inflation report, airfares increased by 6.2% from July to August 2026.
This was mainly due to long-haul routes, where fares increased in August 2026 compared to the fall a year ago.
In August, motor fuel prices increased by 23%
UK motor fuel prices rose 23% in the 12 months to August, today’s inflation report shows.
The figure rose from 15.5% year-on-year through July, with gasoline prices at their highest level since November 2022.
The Office for National Statistics reports that:
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The average price of petrol rose by 9.1 pence per liter between July and August, to an average price of 161.3 pence per liter.
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Diesel prices rose 14.2 pence per liter in August to an average of 181.8 pence per liter.
Chart: How UK inflation was driven by transport costs
UK inflation rises to 3.1%
Breaking news: UK inflation has risen, putting households under new financial pressure.
The consumer price index, which measures the cost of goods and services in the economy, rose to 3.1% in the year to August, up from 2.9% in July.
On a monthly basis, the consumer price index rose 0.5% in August, driven by “Transport, particularly motor fuels,” the Office for National Statistics said.
What follows….
Sanjay Raja, chief economist at Britain’s Deutsche Bank, predicted UK inflation would rise by just over 3% in August.
Rajah told clients last week:
After expectations generally coincided in July, we see that price dynamics will rise again in August. Commodity inflation, food inflation and soaring energy prices are likely to see inflation take another small step higher to end the summer.
We’ll find out in 10 minutes if he’s right!
Experts at Pantheon Macroeconomics have suggested that so-called “AI inflation” could also be a factor driving up prices in the UK.
Rob Wood, their UK economist, said: Pantheon think higher electronics prices due to chip shortages amid the artificial intelligence boom could add 0.2 percentage points to inflation.
Introduction: Today is Inflation Day in the UK
Good morning and welcome to our ongoing coverage of business, financial markets and the global economy.
We’re going to find out whether the decline in the UK’s cost of living intensified last month.
Official inflation data, due at 7am BST, is expected to show headline UK inflation rose in August, further exceeding the Bank of England’s 2% target.
Economists forecast the consumer price index to rise by about 3.1% last month, up from 2.9% in the 12 months to July.
Higher fuel costs caused by a surge in oil prices since the start of the war with Iran are expected to push up the cost of living again.
Petrol and diesel prices are now at their highest levels since the conflict began, and visits to gas stations are the most expensive since 2022.
A jump in inflation could put more pressure on the UK government’s borrowing costs, which hit their highest level since 2007 yesterday as the bond market sell-off continued.
However, the UK is not alone: yesterday the average 10-year bond yield of the G7 major economies reached its highest level since mid-2008.
The UK is also not alone in having problems with inflation. US inflation was 3.4% last week, which is likely to prompt the Federal Reserve to raise interest rates tonight.
Agendas
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7am PT: UK inflation report for August.
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9:30am PT: UK house prices and rents report.
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13:30 BST: US retail sales report.
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19:00 BST: Federal Reserve interest rate decision
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19:30 BST: Federal Reserve press conference.