Creditfix LB 03-2017
Example Leaderboard

UK Earnings and Inflation Disparity Grows

UK consumers are expected to tighten their belts as wage growth continues to slow whilst inflation rises.

Average weekly wages including bonuses in the UK for the three months to April slowed to 2.1 per cent from 2.3 per cent the previous month. The market had predicted a rise to 2.4 per cent.

With bonuses removed, basic wages grew by just 1.7 per cent, well below the forecast of 2 per cent.

With inflation now averaging 2.4 per cent and the latest consumer price index at 2.9 per cent, it means that real earnings in the UK are being squeezed further.

The figures, released by the Office of National Statistics (ONS) mean that inflation-adjusted annual wage growth for total average earnings was negative for the first rime since September 2014, down 0.4%, with the basic pay rate down 0.6%.

There was better news on employment, with the ILO unemployment rate for the three months to April staying at 4.6%, the lowest since 1975, which had been predicted.

Employment increased by a sizeable 109,000 when compared to the previous 3-month period. Employment in the UK was up by 372,000 on a year-on-year basis.

These employment figures are particularly encouraging, as the proportion of people of working age in employment was 74.8 per cent. This represents the joint highest since comparable records began in 1971.

Chris Williamson from IHS Markit commented: ‘Today?s data will add further to the likelihood of consumer spending acting as a drag on the economy in coming months, leaving growth largely dependent on exports, corporate services and business investment.’

He continued: ‘While the upturn in employment is further confirmation that businesses were preparing for stronger growth ahead by expanding capacity earlier in the year, the concern is that the uncertainty caused by the shock general election result will have undermined business confidence, leaving the economy devoid of any significant domestic growth drivers as both business and consumer spending come under pressure.’

However, other experts expect the forthcoming consumer financial squeeze should be ‘nowhere near as severe or prolonged as that seen after the financial crisis’, as the strength of employment figures props up confidence.

Be the first to comment on "UK Earnings and Inflation Disparity Grows"

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Password Reset
Please enter your e-mail address. You will receive a new password via e-mail.

%d bloggers like this: