UK Wages Rising Faster than Prices as Squeeze Comes to End
UK Wages Rising Faster than Prices as Squeeze Comes to End
UK wages rise in real terms for first time in a year
17 April, 2018, 16:55
The figures from the Office for National Statistics (ONS) signal an end to the squeeze on household incomes after the slump in the pound following the Brexit vote drove the cost of living higher.
In early trading on Tuesday, the pound reached $1.4377, surpassing a postreferendum high set in January.
Britons' pay packets grew by 2.8 per cent in the year to February, officially ending a year of real wage falls as salary increases have finally overtaken price rises.
Markets had been looking for wage growth of 3% so the number comes as a disappointment for some although, despite this, it is still significant.
Inflation had topped 3% in recent months but more recently has eased, meaning that according to the latest figures wages, stripping out bonuses, are now growing in real terms by 0.2% - the first positive reading since the three months to January 2017. "Pay growth appears to be finally benefiting from the strength of jobs growth", says Ruth Gregory, a United Kingdom economist at Capital Economics.
The unemployment rate of 4.2%, down from 4.3% in the previous quarter, is the lowest since the three months to May 1975. An ONS spokesman said bonus payments in February were lower than a year earlier but it was too soon to draw conclusions about the bonus season as a whole.
"There were no signs of a let up in the pace of hiring".
Strong wage growth and unemployment data out this morning are also expected to keep the pound stable today. Accordingly, this has implications for interest rates as it's inflation that central banks are attempting to manipulate when they tinker with rates. Markets expect rates to be raised by 25 basis points next month.
If the pound ends the day higher, it will have made gains against the dollar for seven consecutive trading days.
Sterling on Tuesday rose to its highest level since Britain voted to leave the European Union in June 2016, until weaker- than-expected wage data pulled the currency back from those highs.
"The pound was the standout performer yesterday and is now the best performing G10 currency versus the United States dollar on a year-to-date basis". "A lot of the detail in the report suggests the labour market is still tightening", Philip Shaw, an economist with Investec, said.
Against the euro, sterling fell 0.1 percent to 86.44 pence per euro, still close to 11-month highs. He could be right.
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