The rising cost of foreign package holidays and
imported computer games helped to push the UK
inflation rate up to 2.9% last month from 2.7% in
April.
The latest inflation rate is the highest since June
2013, and above the Bank of England's 2%
target.
The Office for National Statistics said food and
clothing also went up in price slightly but the
cost of petrol and diesel fell for a third month in
a row.
The pick-up in inflation is likely to continue the
squeeze on consumers.
Prices are currently rising faster than increases
in salaries, with the most recent ONS data on
wages showing that average weekly earnings
excluding bonuses increased by 2.1% in the three
months to March. Earnings data for the three
months to April will be released on Wednesday.
On Monday, a survey by credit card firm Visa
said household spending dropped for the first
time in four years
last month.
Sterling impact
Computer games are part of the recreational and
cultural goods and services sector, where prices
rose overall by 0.9% between April and May
compared with a fall of 0.4% a year ago.
The cost of the games, which mostly come from
abroad, as well as holidays, has gone up because
of the fall in the value of sterling following the
Brexit vote.
The sugar, jam, confectionery and children's
clothing markets were mainly responsible for the
increase in food and clothing prices.
There were also rises in the price of furniture
and household goods, and in the cost of
electricity - with further price increases coming
into effect in May.
Travellers did have some good news, however,
with the decrease in fuel costs coupled with a
drop in the cost of air and sea travel, which was
influenced by Easter falling in April instead of
March as in 2016.
Inflation 'spike'
Amit Kara, head of UK macroeconomic
forecasting at the National Institute of Economic
and Social Research, said: "We expect inflation
to rise further over the course of this year and
to reach a peak in the final quarter of 2017.
"This spike in inflation will exert further
downward pressure on real household disposable
income, at a time when wage growth remains
modest and in turn squeeze consumer spending."
Nick Dixon, investment director at life insurance
and pensions firm Aegon, said: "This high rate
will particularly affect the purchasing power of
retirees locked into a fixed income and the
growing number whose wages have failed to
keep pace."
Analysis: Andy Verity, BBC economics
correspondent
When you hear politicians lament the squeeze on
living standards caused by higher inflation and
sagging pay rises, it's worth remembering
another squeeze - one the largest parties are
deliberately imposing.
The biggest single austerity measure, imposed
first by George Osborne, is the freezing of
"working-age" benefits. If you receive child
benefit, tax credits or jobseeker's allowance,
your benefits no longer rise with inflation.
Last year that made little difference because CPI
inflation was zero. But with inflation now at 2.9%
, the real value of your benefits is dropping
sharply.
This is projected to cost benefit recipients (and
therefore save the government) £3.6bn a year by
2021.
In addition, further cuts to universal credit
chalked in by Mr Osborne (cutting the amount
you can earn before tax credits are withdrawn
and withdrawing extra support if you have more
than two children) will take another £6bn a year
off low-income families by 2020.
As the low-income think tank the Resolution
Foundation points out, Labour may have said it
will reduce welfare cuts by £2bn a year, but
that's too little to reverse the cuts.
Both parties are effectively planning to keep the
biggest austerity measures and the austerity
"squeeze" on benefit recipients is only just
beginning.
'Key business concern'
Samuel Tombs, chief UK economist at Pantheon
Macroeconomics, said inflation looked set to
peak at about 3.2% in the fourth quarter of the
year, "as retailers continue to pass on higher
import prices to consumers".
"We doubt, however, that a majority of MPC
members will feel compelled to raise interest
rates this year," he added.
Suren Thiru, head of economics at the British
Chambers of Commerce (BCC), warned that
businesses were being hit hard by the rise in
inflation.
"Higher inflation is a key business concern as it
squeezes margins and weakens their ability to
invest, particularly during this time of heightened
political uncertainty." he said.
"The BCC's quarterly economic survey confirms
that businesses continue to feel the inflationary
pressures, with a significant proportion of firms
struggling to absorb the rising cost of raw
materials and other overheads.
"If the current political uncertainty persists, this
is likely to increase the downward pressure on
sterling's value, pushing inflation even higher
over the next year."
The ONS's new preferred measure of inflation
CPIH - which includes a measure of owner
occupiers' housing costs - rose to 2.7% last
month, up from 2.6% in April.
The Retail Prices Index (RPI) measure of
inflation increased to 3.7% in June, up from 3.5%
the month before.
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