United Kingdom wages continue to lag inflation despite low unemployment

Gladys Abbott
October 20, 2017

On the other hand, total earnings in cash terms grew slower than prices over the last year, meaning the real value continues to fall.The combination of rising inflation and stagnating wage growth meant that real wages fell by 0.3 percent.A total of 1.4 million people were recorded unemployed at the end of August, down 215,000 on a year earlier, the ONS added.

The Office for National Statistics said Thursday that retail sales fell by a monthly 0.8% last month, practically wiping off August's 0.9% growth. Economists had forecast a 0.1 percent fall for September.

The decline was driven largely by a fall in sales of non-essential items, such as spectacles, souvenirs, weapons and collectables.

Retail sales are expected to make nearly no contribution to quarterly economic growth in the July-September period, government statisticians said.

Inflation stood at 2.9 percent in August and rose to 3 percent in September, its highest level since 2012.

"Despite the drop in retail sales, it would be unwise to peg a consumer slowdown on one month's figures alone, which can be affected by random events like the weather, or a big sporting event on the telly".

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"We will find out in the coming months whether this is consumers holding off on purchases in preparation for Christmas, or whether the Bank of England's messaging on interest rate rises has been enough to keep some hands in pockets".

An increase that has not been reflected in Salaries, which only rose by 2.1% during previous three months, and refore implies a lower profitability of money perceived by those who work and live on British soil.

The value of pound fell immediately after the figures were released, with sterling down nearly half a cent to $1.3126, suggesting traders believe a rate rise next month is less likely.

"These latest figures will however give the Bank of England further food for thought when it comes to their impending decision on interest rates".

Ian Geddes, head of retail at Deloitte, said a November rate rise "could come at a challenging time for the retail sector". Significantly, there are signs that consumers are now reining in their borrowing.

"And as today's data shows, inflation is already starting to take its toll".

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