There is an annual cycle in consumer finances. January, February and March are generally lean months for spending as wallets and purses recover from Christmas. The second quarter of the year sees preparation for the holidays, before a post-summer recovery. Spending then accelerates again, due to the end of year festivities, before the cycle repeats.
Earnings squeeze is over
The combination of accelerating wage growth and an easing in inflationary pressures is clearly good news for consumers. In February, annual UK wage growth (2.8%) finally overtook the equivalent rate of inflation (2.7%) for the first time since the start of 2017. Following the latest figures for March this trend looks set to continue. The annual rate of UK consumer price inflation (CPI) eased to 2.5% in March – its weakest rate in twelve months. The price of consumer goods (e.g. food & clothing) inflation eased from 3% y/y in February to 2.4% in March. Conversely, consumer services inflation nudged higher to 2.5% over the same period.
Two years of falling real wages look likely to come to an end, just what an embattled high street is crying out for.
A New Year so an opportune time to do a bit of a stocktake. In this extended brief we take a look back at 2017 and ahead to 2018.
The big let down of the post-crisis recovery has been the failure of wage growth to ignite in the face of an ever-tightening labour market. Will 2018 finally be the year it changes? Prolonging the recovery might depend on it.
It’s perhaps tempting fate to say that we’ve never had it so good when it comes to the performance of the job market but things certainly haven’t been so strong for decades. Continue reading
Last week saw jobs and wages rise whilst inflation and interest rates stayed flat. Economists fret about slow productivty growth and the damage that does in the long term. But right now conditions could be much worse. Continue reading