The Bank of England warned yesterday that a surge in early retirement means more interest-rate rises will be needed.

This comes despite mounting signs of recession.

Data from supermarkets showed that families are delaying buying Christmas food as grocery prices surged by almost 15% in the past year, adding £682 to the average annual household bill.

Meanwhile, economists warned that the UK is facing a longer recession than previously thought as a result of runaway prices.

Huw Pill, the Bank of England's chief economist, insisted its interest rate increases are not to blame for the recession, arguing that the downturn is being caused by a sharp drop in the size of the UK's workforce which is fuelling inflation.

But he admitted that his colleagues at Threadneedle Street may have contributed to soaring price rises by continuing with its £450billion bond-buying blitz - known as quantitative easing - during the pandemic.

Fewer workers

Mr Pill also said there are around 600,000 fewer people in Britain's labour force than the Bank had anticipated before Covid.

The lack of workers is maintaining pressure on employers to pay staff more - even though the economy is stumbling into a recession, he said.

The Telegraph reports that, since last December, the Bank has raised interest rates from 0.1% to 3% as it seeks to bring inflation back down from more than 10% towards its target of 2%.

Sanjay Raja, an economist at Deutsche Bank, estimated the economy shrank by 0.6% in the third quarter of the year following slumping household and business confidence, as well as spiralling inflation and the rising interest rate.

"Headwinds to the UK economy will almost inevitably push the economy into recession, with global growth slowing, confidence deteriorating, and persistently-higher inflation and the rising interest rate squeezing disposable incomes further," he said.

The number of people who had bought their Christmas pudding by the end of October was down by a third from last year, figures from Kantar showed.

Delay to spending

The drop, equal to around 700,000 UK households, suggests families are delaying spending on Christmas as food prices and energy bills rise.

Kantar's Fraser McKevitt told the Telegraph that "people are not trying to spread the cost of their purchasing - at least not in October".

More shoppers are turning to cheaper discounters in an attempt to get more for their money, with Aldi once again proving to be the fastest growing retailer in the 12 weeks to October 30.

Its sales were up 22.7% on last year. Lidl, meanwhile, saw sales swell by 21.5%. Together, the pair now hold around 16% of the market share, compared to 4.4% during the 2008 financial crash.

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