Consumer upturn to force wage growth above rate of inflation

Increased consumer spending will fuel a modest amount of growth in wages across Britain, with this rise surpassing the rate of inflation.

Economic forecaster Ernst & Young (EY) is backing annual pay to rise above inflation for the first time in six years and sees this happening as early as April.

This comes as companies brace themselves for “decent but unspectacular growth” in the economy, which is expected to rise by 2.9 per cent. EY believes this will be aided heavily by a 9.1 per cent rise in business investment.   

According to readings cited by sky.com, wages will increase by 1.7 per cent over the course of 2014 while the expected consumer price index (CPI) inflation rate will only rise by 1.6 per cent.

EY says that Britain’s recovery has been assisted by a drop in the amount households save, but says there is now a “firmer footing” in place to allow growth in wages and employment.

According to freshbusinessthinking.com, the group has forecasted a “long period of low inflation” as pressures from commodity prices “remain largely absent.”

On the topic of employment and the rise in wages, Peter Spencer, the club’s chief economic advisor, said: “The consumer upturn will be given a boost from real wages and rising employment, while investment is finally kicking in.”

  

by Richard Towey on April 15, 2014

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