Year-long wage squeeze nearing an end

The year-long squeeze on wages is nearing an end, official figures for the three months to February suggest.

Using the consumer prices index (CPI) average wages went up by 2.8%, still below the 2.9% inflation rate.

But the Office for National Statistics said when wages are compared with their new measure of inflation, including housing costs (CPIH), average weekly earnings rose by 0.2% year-on-year.

Inflation started to overtake wages in February last year, squeezing incomes.

Meanwhile, unemployment in the latest three-month period fell by 16,000 to 1.42 million, with the 4.2% unemployment rate the lowest since the three months to May 1975.

The Bank of England has said it expects the fall in unemployment to start pushing up pay more quickly, which is the main reason why it has said it is likely to raise interest rates more quickly than it previously thought.

The number of people in work has reached a record high of 32.2 million.

The strength or otherwise of people’s incomes is one of the most important drivers of our economy.

Not only is it of obvious importance to people individually – if each year I feel a little richer I tend to have a more positive outlook on life – but it is also the engine at the heart of our country’s growth.

Household consumption accounts for about 60% of the value of the UK economy.

We are not just a nation of shopkeepers, we are a nation of shoppers.

If consumers are on average worse off – as they have been for the last year – then spending levels are put under pressure and economic activity slows.

That means we are producing less wealth, less tax income and less money for spending on things like the health service.

TNT Business

 

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