Return to growth for real wages on cards after year of struggle

Wage growth will outstrip inflation for the first time in over a year if economists’ expectations are realised in data to be published on Tuesday, ending a year in which real-terms pay has sagged.

The Office for National Statistics (ONS) is expected to report average earnings including bonuses picked up to an annual rate of increase of three per cent for February, according to an average of forecasts from City economists.

The last time average pay rose faster than inflation came in January last year. Wages rose by 2.8 per cent in the year to January 2018, still marginally below the three per cent inflation rate during the same period.

Read more: Brexit and inflation set to push UK wages down in 2018

However, since then the ONS has reported inflation fell to 2.7 per cent as the effects of the devaluation of sterling after the Brexit vote finally pass through.

The return to real wage growth will be a relief to businesses around the country who have struggled as Britons’ declining purchasing power has dented spending.

The retail sector in particular has seen a string of notable busts in recent weeks, including Toys R Us and Maplin.

However, economists at Investec said that though their forecasts indicate real wages finally turn the corner in February, retail sales figures to be released on Thursday will likely still be weighted down by bouts of heavy snowfall.

Consensus economists’ expectations for retail sales forecast a month-on-month fall of 0.5 per cent.

Read more: Clues about inflation are hiding in the employment numbers