Figures published by the Office for National Statistics (ONS) have revealed that the UK’s wage growth rate rose at a faster pace than inflation during the three months to February.
Average wages rose by 2.8% compared with a year earlier, the ONS found, whilst inflation fell to 2.7% in February.
Inflation began to rise faster than wage growth in February 2017, helping to squeeze household incomes.
The ONS data also revealed that unemployment fell significantly. The Bank of England (BoE) predicts that the fall in unemployment will help to rapidly increase wages, which could lead the BoE to raise interest rates sooner than anticipated.
Commenting on the wage growth data, Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said: ‘The end of a prolonged squeeze on real wage growth is an important moment, although maintaining positive real wage growth could prove challenging without sustained increases in productivity and relieving the high upfront costs which restrict pay increases.
‘The return to positive real wage growth is unlikely to translate into materially stronger spending in the near term, with consumers expected to remain under pressure from uncomfortably high debt levels, particularly if interest rates rise further.’