Britain’s consumer price inflation shot up even faster than expected in the month of June, according to official data released last week. With jumps in the cost of food and petrol,the annual rate nearly doubled that of the the Bank of England’s target of two per cent.

Inflation on the consumer price index jumped from 3.3 in May to 3.8 per cent in June, the highest jump since the series began in 1997, and the highest on a historical series since may 1992. The expectation for June was a rise to 3.6 per cent. The spike in prices has come sooner than expected, and it is even more pronounced than policymakers had thought.

Big increases in food and fuel costs made the biggest contribution to the rise in the annual inflation rate. Higher meat, fruit and cereal prices helped send food inflation up to 9.5 per cent from May’s annual rate of 7.8 per cent.

The official data showed that the average price of petrol had risen 5.3 pence per litre to 117.6 pence between May and June, while diesel prices had risen 7.1 pence per litre.

But the pick-up in inflation is not confined to areas most directly affected by soaring oil prices. The CPI reading for services inflation rose from 3.8 to 3.9 per cent, and ‘core’ inflation - excluding food, energy and tobacco - edged up from 1.5 to 1.6 per cent. Inflation on the broader retail price index measure, which includes housing costs, rose from 4.3 to 4.6 per cent.

In another related but even more depressing development, the latest labour market figures released midway through last week showed that the upward trend in unemployment is picking up pace. Much worse is predicted as unemployment is expected to rise by around 900,000 in total by the end of 2010.

The 15,500 rise in the count in June was the biggest monthly rise since 1992. What’s more, May’s rise was revised up by 5,300 to 14,300. The cumulative rise seen since the peak at the start of 2008 now stands at 45,000.

Employment is still rising. But the quarterly growth rate has slowed for four quarters in a row now. With employment intentions plummeting, employment expected soon to be falling outright. The number of job vacancies in June dropped to its lowest level in a year. And with employment rising less rapidly than the workforce, the ILO measure of unemployment rose further anyway, by 12,000.

And according to a latest OECD report unemployment among the UK young between the ages of 16-24 has gone up in the last ten years in spite of Labour government’s efforts to improve the situation since it came to power.

Glenda Quintini, OECD economist and author of the report, blamed the rise on the failure to raise the skills of many youngsters. The New Deal scheme to reduce youth unemployment by providing training, subsidised employment and voluntary work had also failed to maintain its initial success.

Meanwhile, there was still absolutely no sign of a pick-up in pay growth. The headline (3- month average) growth rate of average earnings fell from 3.9 to 3.8 per cent in May (on both the including and excluding bonuses measures).

With inflation rising rapidly, there is still a risk of acceleration in earnings growth. The latest bout of industrial action, in particular, has raised concerns that workers will not accept any further squeeze on their real incomes. Thousands of council workers and civil servants went on a two-day strike last week demanding higher pay raises than what had been offered.

However, the Capital Economics Limited, a London based research firm thinks that comparisons with the 1970s are overdone. Not only is industrial action now only really prevalent in the public sector, but the dire state of the government’s finances suggests that it is unlikely to give into demands for higher pay. Meanwhile, the fact that unemployment is rising fairly sharply should keep a lid on pay growth in the private sector.

“If we are right in expecting pay growth to remain subdued, the next move in interest rates should still be down. But pay growth is not the only inflationary risk,” added CEL.

The government’s announcement that the Chancellor Alistair Darling had postponed the 2p rise in petrol excise duties planned for October had been widely anticipated in the light of the high level of oil prices.

The move had already been postponed from April and the effects on both inflation and the public finances are expected to be very small. At the most, it is expected to cut 0.1 per cent from the inflation rate, which is negligible compared to the wider upward contribution (currently 0.9 per cent) from petrol prices.

The lost tax revenue is estimated to amount to about £0.5 billion this year, which will be much more than offset by the rise in North Sea revenues resulting from higher oil prices - the budget projections were based on an average oil price of just $84pb.

In any case, the key influence on the public finances will be the downturn in the wider economy, which is set to push borrowing well above the Chancellor’s forecasts.

Meanwhile, a new study conducted by PwC, the accountants and based on a representative sample of families’ bills rathern a few examples, showed the poorest 10th of households already faced four per cent consumer price inflation on average in May, while the equivalent rate was 3.1 per cent for people further up the income ladder.

On the other hand, according to a report prepared by the Joseph Rowntree Foundation (JRF), the spending power needed to pay for a basic but socially acceptable standard of living in the UK was higher than the official government calculated poverty line.

The JRF report which took two years to compile has claimed that a single person in Britain needs to earn at least £13,400 a year for a minimum standard of living. A couple with two children needs to spend £370 a week excluding rent or mortgage payments, and a pensioner couple need £201, the charity says.

The figures from the JRF are higher than some government estimates. The definition of a minimum standard of living was not merely the amount of money needed for survival, and included “more than just food, clothes and shelter”, the report explained.

”It is about having what you need in order to have the opportunities and choices necessary to participate in society,” it said.