UK wages rise to outstrip inflation

New data released by the Office for National Statics (ONS) today shows that average weekly earnings have increased by 0.4 per cent adjusted for inflation in the first quarter. 

In the three months to March, wages rose by 2.9 per cent excluding bonuses. That means they outstripped CPI inflation for March which stood at 2.5 per cent.

Tom Stevenson, investment director for personal investing at Fidelity International, says: ‘British workers are feeling marginally better off after wages grew in real terms for the second month on the trot.

‘It has long been suggested that wage growth is the missing piece of the puzzle in Britain’s long, slow recovery from the financial crisis. It should be the key to unlocking a return to monetary normality.’ 

But he cautions that just as this piece has fallen into place, UK GDP growth slowed markedly in the first quarter of 2018 and the Bank of England has trimmed its growth forecast for the year.

Kate Smith, head of pensions at Aegon, also points out that this strong employment data is unlikely to be enough in isolation for the BoE to raise the base rate imminently. ‘Today’s news doesn’t guarantee the much-awaited interest rate rise, and consumers should adapt spending and savings habits appropriately.’

The data also reveals that unemployment stood at 4.2 per cent, down from 4.6 per cent a year earlier – the lowest point since 1975.

Tara Sinclair, economist and senior fellow at job site Indeed, comments: ‘Unemployment now stands at its lowest rate since 1975, while the employment rate is the highest on record. However, the reality is that without adding more people to the potential workforce, the pace of job generation will slow and could cause an already tight labour market to burst.’

A separate ONS report reveals that there were 2.29 million EU nationals working in the UK – 28,000 fewer than a year earlier.

Sinclair argues that thousands of UK employers are still betting on continuing economic growth and are trying to hire. ‘As that demand bumps up against the limited supply of workers, there is a need to offer higher salaries to attract new staff.’  

-ETF analysis: How to protect against inflation

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