The cost of living is set to surge throughout the summer, heaping more misery on cash-strapped familes who are already struggling to pay ever-rising bills.

Manufacturers gave warning yesterday that prices would rise sharply because of increases in the cost of raw materials and energy.

Wholesale gas prices also hit a record high, driven by the surging cost of oil. The rise compounded fears that power companies are gearing up for further fuel price increases of 30per cent or more this summer.

The bleak news makes another cut in interest rates this year even more unlikely. Some City analysts even say that the next move in the cost of borrowing could be upwards.

Figures out yesterday showed that prices of goods leaving factories rose by 1.6 per cent last month, the steepest rise since present records began in 1986. Prices have risen 8.9 per cent over the past year. Manufacturers blamed a surge in the cost of the raw materials that they buy to make their goods. So-called input prices have risen by 27.6 per cent over the past 12 months, and company chiefs say that they can no longer afford to absorb the increases. Michael Saunders, of Citigroup, said that input costs had risen more over the past 16 months than in the whole of the previous 21 years.

The figures mean that further rises in the price of goods bought in supermarkets and on the high street are inevitable, news that will alarm the Bank of England whose Monetary Policy Committee has the task of keeping inflation under control.

It may decide that base rates will have to rise beyond the current 5 per cent to address inflationary dangers across the economy.

In another sign that inflationary pressures are accumulating, wholesale gas prices smashed through the £1 per therm mark for the first time yesterday. Industry experts believe that the next round of domestic fuel increases could come in August, or possibly even sooner.

John Hall, an independent energy expert, gave warning that the scale of the wholesale gas price increases meant that domestic customers could be hit by energy price rises of as much as 38 per cent this year - far more brutal than the 15-20 per cent increase already imposed.

“Most suppliers will want to get their pricing in place in advance of the winter season,” said Mr Hall.

Wholesale electricity prices, which are closely linked to gas, also rose sharply yesterday.

The increases have been driven by the soaring price of crude oil, which rose by 11 per cent last month and hit a record high of more than $139 a barrel on Friday amid fears of growing tensions between Israel and Iran. Most commercial gas contracts between producers and their customers are indexed to oil.

Mr Hall said that the next round of fuel price rises was likely to be “much, much bigger” than the last one in January and February. “The number of fuel poor is set to rise dramatically,” he said.

At least two of Britain's top-six energy suppliers have issued thinly veiled warnings in recent weeks that further price hikes are in the pipeline.

However, the latest survey of demand on the high street suggests that consumers still have an appetite for spending.

The British Retail Consortium reports today that the good weather helped to tempt shoppers back to stores and shopping malls last month, with sales reviving from a very poor April. Like-for-like sales rose by 1.9 per cent in May, compared with a year before, making up for April's 1.5 per cent drop. The overall value of sales jumped by 4.6 per cent from a year earlier, up from a meagre 1 per cent in April.

The BRC sounded a warning that the sunny May weather masked difficult underlying conditions and that the pick-up in trading was liable to prove only temporary. Demand for furniture and homeware, as well as “big ticket” electrical products was still being hit hard by the slump in the housing market, it said.

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