United Kingdom wage growth after inflation nearly disappears in three months to February

Office for National Statistics

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said: 'CPI inflation didn't rise further in March only because the Easter holidays-when transport prices spike-were in late March last year but are in April this year.

The urban CFPI in the month of March was 2.27% as compared to 1.87% in February and 3.98% during the same period past year.

Consumer price inflation has remained at 2.3 per cent in March, remaining at its highest year-on-year level since October 2013. "With inflation rising, real pay growth has fallen back for the third month in a row now". Excluding bonuses, earnings eased from an upwardly revised 2.4% in January to 2.2% y/y in the three months to February. Meanwhile, the number in work rose by 39,000 to a new high of 31.8 million, representing an employment rate of 74.6 per cent, the joint highest since records began in 1971.

The Consumer Price Index measure of inflation stood at 2.3% in February and remained steady in figures for the following month, released on Tuesday.

The figures confirm that a long period of food price deflation, helped by a supermarket price war, is over thanks to the slump in the pound since last Summer's Brexit vote.

The bureau attributed the rise to a 1.9 per cent decrease in food prices - including a 7.9 per cent dip in vegetable prices in March as compared to February - representing a third of the Chinese index.

The government targets around 3 percent inflation for the whole year of 2017 and inflation is still a far below the government's target range. With wage increases lagging behind inflation the higher prices do seem to be having an effect on consumer spending.

Finance minister Amr El-Garhy has said he expects inflation to start falling in November or December of this year.

Compared to same period of 2016 air fare inflation dived 22.8%, reflecting an Easter weekend price spike which falls in April this year.

Also in April, increases in taxes on air passengers and vehicle owners are kicking in and many utility companies are raising their prices too.

Those are the lowest figures since 2014, says the BBC. "While house prices and rental costs rose over the year, the rates of increase continued to slow markedly".

Viktor Nossek, director of research at WisdomTree, said: "It is worth remembering that CPI in the United States is only just creeping up despite wages increasing in response to a stronger labour market".

"Higher inflation will put pressure on real wage growth and household budgets and will likely squeeze consumer spending".

Although wage growth remained subdued, he said "we doubt that a repeat of the erosion of households' spending power seen after sterling's last major depreciation in 2008 is on the cards, when the rise in inflation was exacerbated by a pick-up in commodity prices and a series of Value-Added Tax hikes".


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