Inflation has surged to a higher than expected 2.9 per cent in a new squeeze on wages fuelled by rising prices for clothes, food and computer games.
Economists had been expecting consumer price inflation to hold steady at 2.7 per cent.
But official data revealed today by the Office for National Statistics revealed the cost of living continues to rise.
The figure will mean greater pressure on household incomes as inflation outstrips wage growth.
The increase in the cost of living remains above the Bank of England’s 2 per cent target, and is likely to raise pressure on the Bank’s Monetary Policy Committee (MPC) to consider hiking interest rates beyond 0.25 per cent when it meets later this week.
Official data revealed today by the Office for National Statistics revealed the cost of living continues to rise
The figure of 2.9 per cent is the highest level since June 2013 when CPI also reached 2.9 per cent, and was last surpassed in April 2012 when the index rose to 3 per cent.
CPI hit 2.7 per cent in April, marking its highest level since September 2013 and overtaking wage growth, which rose by 2.1 per cent in the three months to March.
Jobs data last month showed average weekly earnings in real terms – adjusted for inflation – fell by 0.2 per cent in the first fall since the third quarter of 2014.
TUC General Secretary Frances O’Grady said: ‘The election showed that working people are struggling. And the biggest price rises in four years won’t provide any comfort.
‘Working people are still £20 a week off worse, on average, than they were before the crash – and now rising prices are hammering their pay packets again.
‘The new government must stop the real wage slide. Ministers must focus on delivering better-paid jobs all around the UK.
‘And it’s time to lift the artificial pay restrictions in the public sector. Our hardworking nurses and teachers are long overdue a pay rise.’
A further squeeze on household incomes is another headache for Theresa May as she scrambles to recover from a poor election TUC General Secretary Frances O’Grady insisted the new government must stop the real wage slide
Bank governor Mark Carney warned last month of a ‘challenging time for British households’ in 2017 as Brexit-fuelled inflation will eat into finances.
There has also been gloom over the economy, with growth slowing more than expected to 0.2 per cent in the first quarter.
This was at odds with the Bank’s predictions for growth of 0.4 per cent between January and March, although the latest surveys from the main sectors suggest a slight pick up in the second quarter.
The detail of the figures revealed the biggest upward impact on the cost of living came from recreational and cultural goods and services – including holidays abroad – which overall rose 0.9 per cent between April and May compared with a fall of 0.4 per cent a year earlier.
The cost of package holidays alone was up 0.6 per cent in May.
Britons have seen the cost of foreign travel increase following the post-Brexit vote collapse of sterling, which has knocked purchasing power abroad where the local currencies have gained strength versus the pound.
The cost of games, toys and hobbies shot up 2.7 per cent, thanks in part to a jump in computer game prices – though the ONS stressed that these are often dependent on bestseller charts and can fluctuate from month to month.
Bank governor Mark Carney (file picture) warned last month of a ‘challenging time for British households’ in 2017 as Brexit-fuelled inflation will eat into finances
Computer equipment also rose, particularly in areas like data processing which saw costs rocket 3.4 per cent.
The price of clothes jumped by 0.6 per cent between April and May, compared with a drop of 0.3 per cent last year, with children’s clothing the biggest driver behind the rise.
Consumers also saw decorating costs creep higher, thanks to higher prices for lounge furniture and textiles, which helped push household goods and furniture up 1.2 per cent overall.
Price hikes from utility companies sent the cost of electricity soaring 4 per cent, and comes after two of the Big Six energy providers – SSE and E.ON – introduced tariff increases at the end of April.
Downward pressure on the cost of living came from fuel pump prices, with petrol falling 1p to 116.4p per litre and diesel also dropping 1.6p to 118.7p per litre between April and May.
Airline prices also fell by 6.4 per cent month on month, after the effect of Easter travel boosted air fares in April.
The Consumer Price Index including owner occupiers’ housing costs (CPIH) hit 2.7 per cent after reaching 2.6 per cent in April.
CPIH is the ONS’s preferred measure of inflation, which includes costs associated with living in, maintaining and owning a home.
The Retail Price Index (RPI), a separate measure of inflation which includes council tax and mortgage interest payments, reached 3.7 per cent last month, up from 3.5 per cent in April.