Rising petrol and diesel prices in June were the main factors responsible for a 2.9% annual rise in consumer prices, along with fewer discounts on clothing, The Guardian reports.

This was the highest year-on-year inflation increase since April last year and the June retail price index measure of inflation, which is used as the benchmark for many pay deals, also increased to 3.3% from 3.1% in May. However, wages, excluding bonuses, rose by only 0.9%, a rate that could not compensate for the fast increase in consumer prices and in real terms means that wages are falling. With bonuses included, wages rose by just 1.3% during the year.

Sources from the Treasury say that government measures such as raising the tax-free threshold to £10,000, which will relieve some 2.4 million people of income tax, as well as the freezing duty on fuel, will help families cope with the rising cost of living. But shadow Treasury Minister Catherine McKinnell argues that when inflation is taken into account, wages have dropped by an average £1,300 in the past three years.

The Guardian also reported that factory gate prices for UK manufacturers rose by 2.1% in June, which was more than the expected 1.9%, as a result of a 4.2% annual increase in costs, the highest increase in more than a year. Although some economists are upbeat about the continuing overall recovery in the UK economy and corporate sector forecasts are optimistic for the annual outlook, inflation is continuing to pressure regular households. Rising prices harm consumer spending which ultimately dampens economic growth.