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Inflation doubles in just six months as millions of families face soaring food bills

Posted on 2:06 PM by Sameer Shah

Inflation has doubled in six months, driven by a record surge in supermarket food prices which has delivered a hammer blow to millions of families.

The official Consumer Prices Index (CPI) measure of inflation leapt to 4.4 per cent in July, which is the highest figure since 1997 and double the figure in January.

While the Retail Price Index - including housing costs - rose to hit 5 per cent, which is the highest level for at least 17 years.

City analysts described the figures as 'disturbing' and warned the Bank of England may decide to raise interest rates to tame runaway price rises.



Conservative leader David Cameron seized on the findings to rubbish the record of Gordon Brown.

'The most important concern up and down the country is the deteriorating state of our economy,' he told reporters at his monthly press conference.

'Hundreds of thousands of families now have the threat of negative equity hanging over them, businesses are cutting back, unemployment is creeping up and this morning's inflation figures are yet another worrying signal for families desperately trying to make ends meet.'

The Tory Shadow Chief Secretary to the Treasury, Philip Hammond, said: 'These shocking figures reflect what families have felt in their wallets for many months... Families are crying out for some leadership from their Prime Minister.'

Global Insight economist Howard Archer said the sharp spike in inflation increased the risk of an interest rate rise.

'This is a really disturbing set of data that will not go down at all well at the Bank of England... The rise in consumer price inflation was well above expectations,' he said.

Analyst Vicky Redwood, of Capital Economics, said it now seems likely that CPI will hit new heights within months.

'Even with the recent drop in oil prices, it still looks possible that CPI inflation will hit 5 per cent within two or three months as the latest round of utility price hikes affects the index,' she said.

Britons are suffering the biggest squeeze on living standards since the 1970s, when the global economy was rocked by soaring energy prices.

Record price rises threaten to derail the Government's efforts to put a cap on pay increases.

While rising inflation coupled with lower spending and a property market in sharp decline are combining to threaten a wider economic recession.

The Office of National Statistics said: 'Food inflation alone has spiralled to a CPI record 13.7 per cent on the year, up from 10.6 per cent in June.

'This was principally due to a rise in meat costs, particularly bacon, ham and poultry. Meat rose to 16.3 per cent year on year, up from 11.2 per cent in June.'

It said: 'Breads and cereals saw an increase of 15.9 per cent on the year... Vegetables, including potatoes, shot up to 11.1 per cent up from 7.4 per cent.'

The ONS figures suggest someone spending £100 a week on food last year, will have to find another £712 this year to put the same items on the table.

The Daily Mail Cost of Living Index which looks at a smaller basket of shopping basket essentials found an annual increase of 25per cent in August. This equates to an extra £1,300 a year.

The ONS said the cost of transport is also rising at its fastest pace since the existing system began in 1997, largely because of higher oil prices.

The average price of petrol at the pumps increased by 1.2 pence per litre between June and July this year, to stand at 118.8 pence. Last year prices fell slightly.

Diesel prices rose by 1.8 pence per litre this year to stand at 132.3 pence per litre, compared with a fall of 0.4 pence last year.

The price of flights was also up sharply, largely because many airlines have introduced punishing fuel surcharges. Here fares rose by an annual average of 8.9per cent.

The ONS said the average cost of gas and electricity was 16.1per cent higher in July than a year ago. However, this figure is expected to take-off following a 35per cent rise in gas bills announced by British Gas.

It said the cost of fuels and lubricants, which includes products like the heating oil purchased by millions of rural home owners, surged more than 25per cent - another record.

Union leaders yesterday argued that rising inflation justified their demands for higher pay.

TUC general secretary Brendan Barber said: "These figures show that things are only getting tighter for families across the UK. It's clear that inflation is not being driven by pay, but by shifts in energy and food prices across the world.

'It is vital that pay rises keep pace with inflation to ensure that our standard of living is not slashed over coming months.'

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