HOWZAT

Food bills at supermarket checkouts across the country are also climbing rapidly, with food prices up by 1.3 per cent in April alone, and by 7.2 per cent since last year, breaking records for the consumer price index that began in 1997.

Prices for fish registered some of the steepest increases at the tills last month, rising by 4.2 per cent, while the cost of bread, cereals, meat, and fruit also charged upwards.

Meat prices rose by another 1.5 per cent and are now 4.1 per cent up since April last year, while bread prices have risen by 8.5 per cent since then. The cost of fruit rose 3.2 per cent last month, and is 7.4 per cent higher year-on-year.

There were further big increases in the cost of living from diverse factors including bank charges, dearer alcohol prices in restaurants, bars and off licences due to duty increases in Alistair Darling’s March Budget, and less aggressive discounting by furniture retailers than was seen last year.

The unexpected jump in inflation comes just a day after other official figures revealed that the cost of goods leaving Britain’s factories surged upwards last month at the fastest pace on more than two decades, rising by 7.5 per cent year-on-year.

City economists said that the Bank is likely to have been rattled by the figures and that Mr King and his colleagues on the Monetary Policy Committee now confront a severe quandary over their next move. Even as price pressures build-up, pressure for the MPC to cut rates is rapidly mounting, amid growing signs that the economy is on course for a sharp slowdown.

More evidence emerged today of the downturn tightening its grip, with housing market conditions the weakest for 30 years according to surveyors, and a report from the British Retail Consortium showing like-for-like sales on the high street falling for a second month in a row in April.

There was some relief for consumers, and consolation for the MPC, as the inflation figures also suggested that intensifying high street competition is capping price pressures for some products, such as clothing and footwear. Prices for clothing fell last month, having risen last year, leaving them falling at an annual pace of 6.3 per cent - the fastest pace of decline since December 2002.

But economists sounded warnings that inflation now looks likely to remain stuck at 3 per cent or more for most of the rest of this year.

Analysts said that the MPC’s anxieties over inflation would be further increased by some signs that price pressures are spilling out, having previously been largely confined to food and fuel. So-called “core inflation”, which excludes the cost of energy and food products, rose to an annual 1.4 per cent last month, from 1.2 per cent.

Inflation worries are also being fuelled by the recent steep fall in the pound, which has dropped by about 12 per cent over the past year on its trade-weighted index, with its sliding value adding to Britain’s import bills.

“This is another horrible surprise on the inflation front,” Howard Archer, of Global Insight said.

He cautioned that the Bank will now fear that the higher cost of living will stoke households’ expectations of future inflation and wage demands, threatening to entrench cost and prices pressures in the economy.

That concern will be further inflamed by today’s figures for the closely-watched Retail Price Index, which showed inflation on this measure, rising to an annual rate of 4.2 per cent last month, up from 3.8 per cent in March to its highest since November.

Money Central: the 10 items that have fallen in price the most this year

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