Cost of living rises three times faster than salaries

A record jump in the cost of air travel helped push inflation higher than expected to 2.7 per cent last month.

The size of the increase — from 2.4 per cent in April — caught City economists by surprise and means the cost of living is now rising three times faster than wages.

The price of flights shot up 22 per cent in May when cold weather prompted a surge in bookings for holidays in the sun. The timing of Easter, which fell far earlier than last year, may have also played a role as fares jump during the holiday season, then fall back afterwards. The cost of women’s clothes went up more than expected as well when the chilly spring boosted demand for jackets.

The headline measure of inflation — the Consumer Prices Index — is expected to rise again this month and could peak at more than three per cent over the summer before starting to fall back.

It was the 40th month on the trot that prices have risen ahead of wages suggesting that there will be no immediate revival in high street spending. TUC General Secretary Frances O’Grady said: “Forty consecutive months of real wage falls means people have less to spend on the high street, and are why economic green shoots are not being felt across the country. ”

Labour said wages were an average of £1,300 a year lower in real terms than when the Coalition came to power three years ago. Londoners face a particularly sharp squeeze as the price of property is rising far more quickly than the rest of the country.