Americans are struggling to cope with the fastest rise in the cost of living for 17 years as one in every 464 US households face the real risk of losing their homes, two sets of data showed today.

Official inflation statistics published by Washington's Labour Department showed that consumer prices rose by 0.8 per cent in July - twice the rate that Wall Street had been expecting. That rise, which compares with an increase of 0.4 per cent in June, means that the cost of living in America is rising at a rate of 5.6 per cent over the year as a whole.

Persistently high gasoline prices and increasing food costs are driving the inflation rate, which is leaving America's Federal Reserve in a quandary about whether to raise the cost of borrowing - currently at 2 per cent - to stem the surging cost of living, or to freeze interest rates to try to nurture economic recovery.

At the same time, numbers published by RealtyTrac, showed that the number of American households sinking into the foreclosure process had risen by 55 per cent last month. Foreclosure covers a range of financial predicaments including a homeowner falling just one month behind with his mortgage repayments as well as eviction and repossession by the lender and forced auction by a US sheriff.

According to RealtyTrac, around 272,000 homes received a foreclosure-related notice in July, compared with 175,000 for the same month the year before and up by 8 per cent in June this year.

While the numbers show that on average, one household in 464 across the US fell into the foreclosure process, some states have much higher rates. Florida, California, Arizona, Ohio, and more recently, Georgia, show the highest rates of mortgage defaults and repossessions.

The foreclosure process spells gloom for the housing market as a whole, with lenders desperate to sell repossessed property. The increased amount of discounted real estate for sale is further depressing prices and also adding to oversupply in the housing market. RealtyTrac said today that more than 77,000 properties were repossessed by lenders across the US in July. Banks are eager to dump the properties at a discounted price for fear that the US real estate market will continue to fall, leaving lenders with depreciating assets on their books, but also because many states force the financial institutions to maintain and protect the empty homes from neglect and vandalism to prevent neighbourhoods from becoming slums.

Two other sets of official data also showed the severe strain imposed on the US economy. According to statistics from the Labour Department, 450,000 Americans lost their jobs last week, which represented a higher number than Wall Street had expected. Around 5.7 per cent of the American workforce is now unemployed. At the same time, pay data showed that real earnings fell in July by 0.8 per cent, leaving Americans less income to absorb higher fuel and food costs.

On the inflation front, Wall Street is hoping that the recent slide in the price of oil, down $30 a barrel in three months - will depress gasoline pump costs and help stem the rate of inflation.

Last month, energy prices jumped 4 per cent overall, while pump prices rose 4.1 per cent nationwide. The price of gasoline is now 37.9 per cent higher than in July 2007. Food costs rose 0.9 per cent last month, marking a 6 per cent increase over the last year. However, of greater concern was the sharp rise in clothing costs - up 1.2 per cent - which was interpreted by Wall Street as evidence that inflationary pressures are now spreading across many types of goods across the economy, not just food and fuel related products.

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