Published: Fri, May 19, 2017
Worldwide | By Gretchen Simon

UK Real Wages Fall For First Time Since 2014 -- Market Talk

UK Real Wages Fall For First Time Since 2014 -- Market Talk

Although the United Kingdom unemployment rate fell to its lowest since 1975, weekly wage growth slowed to heap further pressure on consumers already battling with rising inflation.

United Kingdom pay growth lagged inflation for the first time in over two years in early 2017, underscoring the growing Brexit squeeze facing many households.

The Consumer Price Index (CPI) has also seen a massive increase in the last 12 months, from 0.3% in April previous year to 2.7% last month.

That meant regular pay, when adjusted for inflation, fell by 0.2 per cent in the first three months of the year, the first fall since the third quarter of 2014.

Annual inflation in the United Kingdom stood at 2.7% in April, the fastest rate of price growth in over three years, overshooting the Bank of England's 2% target for the third consecutive month.

Consumer prices in the United Kingdom rose more strongly than expected in April as higher air fares pushed the headline inflation to the highest since September 2013.

The Bank of England blames recent rises in United Kingdom inflation mainly on a 16-per cent fall in sterling since Britain's referendum a year ago to leave the European Union.

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Data on Tuesday recently showed that consumer prices in the United Kingdom have been rising at its fastest rate in the past three years as more and more Britons continued to face tight living standards in the eve of the country's separation from the European Union and the looming general elections. Analysts were expecting CPI to increase to 2.6% and for core inflation to rise to 2.2%.

The rising rate of inflation and CPI will cause a squeeze on pay, the growth of which is expected to remain at a muted 1% over the year to come.

The construction of the CPI combines economic theory, sampling and other statistical techniques using data from other surveys to produce a weighted measure of average price changes in the Nigerian economy.

"However, it remains probable that the current period of above target inflation is transitory in nature, with little evidence that higher price growth is becoming entrenched in higher pay growth".

Prime Minister Theresa May is widely expected to defeat the opposition Labour Party which is calling for an end to strict limits on public sector pay growth and higher minimum wage.

Data released yesterday showed United Kingdom consumer price inflation picked up speed in April to hit 2.7% and many economists think it will reach 3% soon.

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