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UK wage growth after inflation almost disappears in three months to February

Loknath Das April 12, 2017 Business Comments Off on UK wage growth after inflation almost disappears in three months to February
UK wage growth after inflation almost disappears in three months to February

British pay growth after accounting for inflation almost disappeared completely in the three months to February, the clearest evidence yet that households are feeling the strain of rising prices as Brexit negotiations begin.

Workers’ total earnings including bonuses rose by an annual 2.3 percent in the three months to February, unchanged from the previous period, the Office for National Statistics said on Wednesday.

Economists taking part in a Reuters poll had expected wage growth of 2.2 percent.

But after taking into account inflation, total pay growth rose just 0.2 percent and excluding bonuses it inched up just 0.1 percent in the three months to February. Those were the weakest real-terms increases seen since mid-2014.

British households are grappling with sharp increases in prices, fuelled by rising energy costs and exacerbated by the pound’s plunge that followed last year’s vote to leave the European Union.

Britain’s official forecasters had expected pay growth in real-terms would evaporate later this year, but Wednesday’s figures showed this is happening already.

Data released on Tuesday showed consumer price inflation stood at 2.3 percent in the 12 months to March and the BoE expects it to approach 2.7 percent by the end of this year.

Many private economists expect inflation will surpass 3 percent this year.

The unemployment rate in the period between December and February held steady at an almost 12-year low of 4.7 percent, in line with the median forecast for Wednesday’s figure in a Reuters poll of economists.

The unemployment rate is expected to rise this year as companies hold off from hiring as they wait for more clarity on the country’s future ties to the EU.

The number of people in work increased by 39,000, taking the employment rate to 74.6 percent, a joint record high.

After Britain’s economy withstood the initial shock of the Brexit vote last year, economists have reined in their forecasts for how much unemployment is likely to rise.

The ONS said the number of unemployment benefit claimants rose by 25,500 to 765,400 in March, the largest increase since July 2011.

Economists taking part in the Reuters poll had expected the number of benefit claimants – which is considered to be a potential early warning sign of an economic downturn – to fall by 3,000.

The ONS said the number of vacancies in the three-month period to the end of March rose by 16,000 to a record high 767,000.

British workers are becoming more reticent about moving jobs as the process of leaving the European Union gets underway, exacerbating long-standing skill shortages, a survey of recruiters showed on Friday.

[Source:- Reauters]

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