Following the news that CPI inflation jumped to 2.7 percent in April, today’s labour market numbers from the ONS revealed wages are now falling when adjusted for inflation. From Ben Brettell, Senior Economist, Hargreaves Lansdown.
Wage growth excluding bonuses came in at 2.1 percent in the three months to March compared to the same period last year – and fell 0.2 percent in real terms during that period. With inflation forecast to carry on rising – Bank of England policymakers predict inflation will peak at a little below 3 percent in the fourth quarter – household budgets look certain to be squeezed further in the coming months. The economy has surprised on the upside since last summer’s referendum, powered by a resilient consumer, but it looks like households are now starting to feel the pinch from the current bout of inflation with GDP growth slowing to 0.3 percent in the first quarter of this year.
Notwithstanding relatively weak wage growth, the UK labour market looks fairly robust – for now at least. The unemployment rate fell to its lowest rate since 1975 and employment reached a new record high.
