Life on Mars: Back to the 70s as standard of living FALLS but strikes and cost of food RISE

The combination of soaring food, fuel and household energy prices is outpacing increases in salaries, and pushing many family budgets into the red.

The warning came as a 'truly shocking' increase in the price of raw materials was revealed, threatening misery for consumers and disaster for the economy.

Back to the bad old days: Firemen marching through London in November 1977 echoes the rising number of strikes today as prices rise and the standard of living falls just like in the 1970s

Economists said that the increase in prices would reduce families' disposable incomes more quickly than at any time since the oil crises of the 1970s and early 1980s.

In another illustration of the UK's troubled economy, a fresh set of figures showed one million working days were lost due to strikes last year.

In all there were 90 separate stoppages, which included walkouts by prison officers, tube staff and postal workers.

Official figures showed 1.041million working days were disrupted by stoppages last year - an increase of 250,000 over 2006.

Some 96 per cent of those lost were in the public sector.

Figures released yesterday showed that the price of manufacturers' basic materials rose by a record 27.9 per cent in the past year.

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The news triggered panic in the City with some traders betting that the Bank of England might have to raise interest rates three times this year to head off rampant inflation.

Experts, however, say this is unlikely because it would plunge the property market into chaos, shred consumer spending and tip the country into full-blown recession.

City analysts described the factory gate figures as a 'nightmare', 'appalling' and 'horrendous'.

At the same time, the price manufacturers charge retailers for their goods rose by 8.9 per cent, which is the fastest rate for 26 years.

Michael Saunders, chief UK economist at investment bank Citigroup, said: 'Inflation is going up and the standard of living is going down.

'We haven't had anything like this since the two oil shocks.'

Life on Mars: DCI Sam Tyler of the Greater Manchester Police (played by John Simm, right), finds himself in the year 1973 after being hit by a car in 2006,

The turmoil triggered a sharp rise in the interest rates that banks charge each other to borrow money, which will make the cost of fixedrate mortgages more expensive.

Government critics fear the country is now staring at the possibility of stagflation - prices rising quickly at the same time as the economy suffers a paralysing slowdown.

Hetal Mehta, senior economic advisor to the Ernst & Young ITEM Club, described the increase in the price of raw materials as 'truly shocking'.

'The Bank of England's nightmare just got a lot worse today,' she said.

Miss Mehta warned that some manufacturers could be forced out of business.

Economist Howard Archer of Global Insight said: 'The abysmal May producer price inflation further constrains the Bank of England's ability to deliver the interest rate cuts that the economy so badly needs.'

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Chief European economist at Capital Economics, Jonathan Loynes, said: 'May's UK producer prices data are absolutely horrendous,' adding: 'The increases are now so large that at least some portion of them looks likely to work its way into the High Street.'

The price of crude oil rose by 83.8 per cent in the year to May.

The cost of food leaving processors and manufacturers rose by 11 per cent, which is the biggest jump since 1986.

City analysts believe that the Bank of England has no room to deliver the cuts in interest rates needed to give the economy a boost.

As a result, the current slump in house sales and prices is likely to escalate, hitting consumer confidence and spending.

This could have serious consequences for retailers and manufacturers, threatening jobs and hastening the slowdown in the economy.

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The figures, published by the Office of National Statistics, show high inflation is apparent across a wide range of products.

Geoffrey Dicks, an economist of RBS, said: 'The shocker this month was how inflation is moving out of the problem areas - oil, petrol, food - into the core.'

Vince Cable, the Liberal Democrat Treasury spokesman, said: 'At a time when the British economy is slowing down, inflation is also steadily increasing. It now seems we're back to 1970s stagflation.'

His Tory counterpart, Philip Hammond, said: 'Hard-pressed families will now be more squeezed than ever as these record factory gate prices feed through into higher prices at the pump and in the shops.' Household-budgets were under even more pressure yesterday when the wholesale price of gas pushed through the £1 a therm barrier.

The price of gas for delivery during the first three months of next year reached 100.93p - more than double the comparable figure for last year.

The Daily Mail Cost of Living Index for May also showed that the cost of a shopping basket of common purchases has risen 19.1 per cent in a year.

A household spending £100 a week on food a year ago could now have to find almost £1,000 more this year in order to buy the same items.

The Daily Mail index for May found a 62 per cent annual increase on butter, 47.4 per cent on free-range eggs and 41.7 per cent on fresh chicken, although the British Retail Consortium claims supermarkets are protecting shoppers against price rises.

Tesco made a record profit of £2.85billion in the past financial year while Sainsbury's profit increased by 28.5 per cent to £488million. Asda and Morrisons have reported similar increases.