HARD-STRETCHED households across Oxford were hit with more bad news last night as inflation rose, placing more strain on tight family finances.

Bus users in Oxford were hit with a 6.5 per cent increase in fares because of spiralling fuel costs, which only added to increasingly hard financial times for businesses and families.

And it has left small, independent firms across the county - and even estate agents - complaining about a potentially-fatal combination of the credit squeeze and rising prices.

The Mattingley family from Headington Quarry, Oxford, have made radical adjustments to keep costs down.

Housewife and mother-of-two Caroline Mattingley, 39, said: "To cut costs my husband now car shares with a work colleague.

"I have started buying more own label brands at the supermarket and we have cut out foreign travel altogether and take domestic holidays with family and friends.

"And I now write a weekly meal planner to make sure I only buy what we need."

Yesterday it was disclosed the Consumer Price Index inflation rate for May - the preferred measurement of the average cost of a basket of every day goods - was 3.3 per cent, above a Government target of two per cent, and the highest since 1997.

And analysts predicted the rate could rise to four per cent by the end of the year.

Last night the highest recorded fuel prices in Oxfordshire was 137.9p-a-litre for diesel and 124.9p a litre for unleaded petrol.

Soaring food prices were blamed for the dramatic increase.

Haulage Contractors Peter L. Mansbridge of Shippon, near Abingdon, said it might have to reduce the size of its fleet because of increased running costs, while Chipping Norton-based taxi firm Ambassador Cars has seen its daily diesel bill rise from £40 to £70.

Meanwhile, Hodsons estate agents in Bicester is to close by the end of the month, while Andrews has announced 13 redundancies in response to a downturn in trade blamed on the so-called credit crunch.

Last month, Oxford Bus Company revealed the price of diesel had risen by 71 per cent in a year.

On June 29 it will increase fares by an average of 6.5 per cent, meaning the cost of a single journey from Oxford railway station to Blackbird Leys will rise from £1.60 to £1.80.

There will be no increase in park-and-ride services or on the London-bound X90 Espress service.

Operations director Louisa Weeks said: "We have managed to delay any increase as long as possible and - although we can't make any promises - we will be working hard to ensure we don't have to increase fares again for a long time.

"No-one likes to pay more, but fuel represents one of our largest costs and we are reluctantly going to have to pass some of the extra costs onto our passengers. Some individual tickets will see smaller rises, others will go up by more and some won't rise at all."Cost at filling stations rises

THE highest-priced fuel recorded in the county last night was 137.9p-a-litre for diesel and 124.9p a litre for unleaded petrol, according to analysts at website petrolprices.com That is the equivalent to a staggering £6.26-a-gallon for diesel and £5.67-a-gallon for unleaded.

Garages charging this amount included Oxford Service Station, off the M40 at Wheatley.

The cheapest-priced fuel was 127.9p-a-litre for diesel and 115.9p-a-litre for unleaded, available at garages including the Shell service station at Pear Tree, Oxford.