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UK Household spending power eroded

15/06/2017 … Author:

The latest release of UK inflation data suggests that the spending power of the UK consumer is continuing to be eroded.  Earnings growth data for the 12 months to the end of April indicates that regular wage growth, therefore excluding bonuses, grew at a rate of only 1.7%.  This represented the slowest rate of wage growth since early 2015.  Including bonuses the figure was 2.1%.  Wage growth is failing to pick up despite a further fall in the unemployment rate which now stands at a 42 year low of 4.6%.

Earlier this week we saw the release of the Consumer Price Index (CPI).  For the 12 months to the end of May consumer prices rose by 2.9%, ahead of the previous months reading of 2.7% and the consensus forecast of 2.7%.  This was the highest reading since June 2013.  Drivers behind the increase were an increase in the cost of overseas holidays, food, clothing and electricity

Source: Office for National Statistics

This reduction in spending power is expected to flow through into consumer confidence and we are already starting to see the negative impact which this can have on retail sales.  This is important for the UK economy as consumption is the key contributor to growth.

 

 

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