U.K. workers suffer spending power hit

0.4 per cent drop in wages — when adjusted for inflation — much worse than economists had feared.
June 15, 2017

Transcript

British workers' earnings after inflation have contracted at the fastest pace since 2014 in the three months to April, underscoring the growing Brexit squeeze facing many households. David Pollard reports.
Tough days for Theresa May as she struggles to regain credibility ...

And amid the biggest loss of real earnings for UK households since 2014 — not the easiest for British workers.

A 0.4 per cent drop in wages — when adjusted for inflation — much worse than economists had feared.

SOUNDBITE (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING:

"That's bad for consumption, it's bad for growth ... If we look at the slowdown in growth in the whole economy in the first quarter this year relative to the fourth quarter, it was significant and a part of this is related to the the softer tone of consumer consumption."

Spending power squeezed from the other side by inflation.

Tuesday's data revealed — at 2.9 per cent — the highest rate in four years as prices rise on a weaker pound.

Raising with them questions — over whether the Bank of England should tighten interest rates.

If the answer appears to be: not until real wages start rising too.

SOUNDBITE (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING:

"There really isn't any sign of that right now. And that is why the market is looking through the rise in U.K. inflation and suggests that the Bank could be on hold right up until 2019."

Sterling slid further on the latest numbers.

And talk around a so-called 'hard' Brexit is also softening ...

The U.K. prime minister now facing an internal party battle over her negotiating strategy after last week's inconclusive UK election.

Talks with EU officials were due to begin on June 19 — that date appears increasingly uncertain.

Unlike the conviction that for U.K. consumers, tougher times may lie ahead.