More worryingly, a survey of pay deals by Incomes Data Services showed that the 'floor' of settlements had been steadily moving up since the start of the year, rising and then steadying in parallel with the rate of inflation.
More than four in five recent pay deals exceeded 2.5 per cent, compared with barely half in January. IDS said the Bank of England was giving annual salary increases averaging 7 per cent, but the Bank said the correct figure was 2.5 per cent.
Net lending to consumers rose to pounds 1.41bn in the second three months of the year, up from pounds 905m in the first quarter, according to the Central Statistical Office. This was the highest figure since the autumn of 1989 and suggests that April's tax increases have not yet persuaded consumers to tighten their belts.
The narrower measure of net lending to consumers - which includes lending on bank credit cards, hire purchase and by building societies - trebled between May and June to a record pounds 683m.
The surge was driven largely by bank credit cards, where net borrowing of pounds 267m in June followed a net repayment of pounds 99m of debt in the previous month. This may reflect spending in summer sales.
Michael Saunders, economist at Salomon Brothers, said it appeared that personal savings had fallen sharply in the second quarter, helping to offset the impact of tax increases.
The rise in consumer borrowing is likely to suggest to the Bank of England that recovery is gathering pace, despite the impact of tax rises and the weakness of the housing market. This might argue for an early rise in interest rates. But there is still little sign yet of inflationary pressure taking grip. The CSO reported that factory gate inflation - the annual rate of increase in the prices manufacturers charge for their products - fell from 2.1 per cent in May and June to 1.9 per cent last month, the lowest since December 1986. Factory gate prices were unchanged between June and July.
Excluding food, drink, tobacco and petrol - where prices are affected by excise duty changes - factory gate inflation fell from 2 per cent in June to 1.9 per cent in July, the lowest figure since 1967.
Manufacturers' fuel and raw material prices fell by 0.3 per cent in July, but from a higher level in preceding months than the CSO had first calculated. The annual rate of input price inflation jumped from 2.2 to 2.9 per cent, the highest since last September.
Adjusting for seasonal effects, input prices rose by 0.5 per cent in July, with higher crude oil prices a big contributor. Commodity prices rose by more than 7 per cent in July alone, in dollar terms.
Input prices have been pushed around 5 per cent higher since the beginning of the year by dramatic price rises on world commodity markets, in part driven by speculative buying from hedge funds. There is little sign so far that manufacturers can pass on higher costs to customers. Instead, they are absorbing them in profit margins.
'The evidence suggests that the current rate of output price inflation has probably reached its trough,' Andrew Cates of UBS said. 'Input prices are increasing faster than output prices, unit wage costs are under pressure and firms are desirous to expand their profit margins.'
The markets took the figures well, with gilts holding out against a disappointing performance in overseas bond markets.Reuse content