LONDON: Britons’ wages after inflation rose at their slowest pace in nearly three years in the three months’ through February, data showed Wednesday, adding to signs that Britons are facing a living standards squeeze despite a tightening labor market. The figures highlight a potential drag on the U.K.’s economic growth just as it begins to negotiate its exit from the European Union, expected to last at least two years. The U.K.’s economic growth relies heavily on domestic demand, which is likely to falter as Britons’ wages struggle to keep up with price increases.
Adjusted for inflation, regular wages in the December-February period grew by only 0.1%, the slowest pace of growth since mid-2014, the Office for National Statistics said. Annual inflation in the U.K. stood at 2.3% in February and March, the fastest rate of price growth in over three years, overshooting the Bank of England’s 2% target. Data showed that growth in Britons’ wages faltered despite a robust labor market, with employment rate and the number of vacancies at record-highs. The unemployment rate was unchanged at 4.7%, in line with the expectations of analysts polled by The Wall Street Journal. The unemployment rate was last lower in the summer of 1975, the ONS said.
Official data suggest inflation is already souring British shoppers’ moods. Retail sales rebounded in February after three consecutive months of decline, but government statisticians warned that the underlying trend remained weak, suggesting that the industry was unlikely to contribute to economic growth in the first quarter. Separately, an industry survey showed that total sales in March fell for the first time since mid-2016. Official data for March are expected later this month. The Bank of England expects inflation to peak at around 2.75% early next year, and Gov. Mark Carney has signaled that he is prepared to tolerate an overshoot of the bank’s target if it helps keep the economy on an even keel while Prime Minister Theresa May negotiates the U.K.’s EU withdrawal, which began on March 29.
