According to Societe Generale’s Sam Cartwright, headline inflation in the United Kingdom increased to 2.9% year-on-year in July, primarily due to higher household energy bills [1]. The report highlights that rising Brent crude and wholesale gas prices, along with indirect energy effects, are expected to push the headline Consumer Price Index (CPI) towards 3.5% later in 2026 [1]. Despite these energy-driven pressures, services and food inflation are showing signs of easing, and the indirect spillover effects from the energy shock have so far been limited [1].
Cartwright notes that the inflation outlook is shaped by the ongoing energy shock, with higher Brent and wholesale gas prices anticipated to further increase fuel and household energy costs in the near term [1]. While some spillover to food and goods inflation is expected, firms' limited pricing power is likely to restrict the extent to which higher input costs are passed on to consumers [1]. Societe Generale estimates that the combination of these factors, along with the gradual emergence of indirect effects from the energy shock, will push headline inflation to around 3.5% year-on-year later this year [1].
The report also emphasizes that there is significant uncertainty surrounding this forecast due to the volatility in energy prices [1].
CONCLUSION
UK headline inflation is being driven higher by energy costs, with Societe Generale forecasting a further rise to around 3.5% later this year. While indirect effects remain limited and some inflation components are easing, uncertainty persists due to volatile energy markets.