The ability of the British economy to improve the living standards of workers will come back under the microscope this week, when the latest figures for wages, employment and inflation are revealed by government statisticians.
The Bank of England reckons higher wages are just around the corner, helped by the lowest rate of unemployment since the mid-1970s, yet economists are doubtful there will be much positive news just yet. While the economy has gathered pace in recent months, helped by the warmer weather, the royal wedding and the World Cup, there has been little evidence so far of the spoils being shared through pay increases.
The growth rate might have doubled to 0.4% in the second quarter from the first three months of the year, but the TUC general secretary, Frances O’Grady, has warned that this is far from enough to support workers.
“We should not accept weak growth as the new normal – it’s the result of bad management of the economy. There has been too little investment and a failure to focus on getting wages rising,” she said.
The consensus among City analysts is for annual growth in average weekly earnings in the three months to June to hold steady at 2.7%, the same level as recorded in May, when the Office for National Statistics publishes the latest figures on Tuesday.
Threadneedle Street raised interest rates this month in the hope that greater pay rises are just around the corner. Ian McCafferty, an outgoing member of the monetary policy committee, said last week he thought wage rises could accelerate towards 4% next year amid rising labour market shortages.
The latest figures are expected to continue showing unemployment hovering at 4.2%, which would be the joint-lowest level since Mud and the Bay City Rollers were topping the charts in May 1975.
Updated inflation figures, seen as the benchmark for pay increases to beat in order for them to be meaningful, will be published on Wednesday. Having risen sharply since the Brexit vote as a result of the weak pound, inflation reached a five-year high towards the end of 2017, although it has begun fading in recent months.
Economists predict the consumer price index will have risen again in July, eroding the spending power of hard-pressed British households. Fuelled by the rising cost of petrol at the pump for motorists, while global oil prices remain high, the CPI is forecast to have risen to 2.5% from a level of 2.4% in June.
There will also be fresh readings for the property market, which are likely to point towards continuing weakness in London, dragging down the growth rate for house prices across the country.
If Tuesday is about wages and Wednesday the cost of living, Thursday will complete the picture by showing how British consumers are spending their incomes. The latest snapshot for retail sales in July is forecast to indicate a rebound for consumer spending. The summer heatwave and the opening stages of the World Cup discouraged shoppers from buying much aside from food and drink in June, although there are hopes for a recovery as England made it to the semi-final. Month-on-month sales are expected to grow by 0.2%, having fallen by 0.5% in June.
All eyes will then turn again to the Brexit negotiations as they resume on Thursday – which could have implications for the pound. Sterling has dropped to the lowest levels this year against the euro and the dollar in recent weeks, at a time when fears are mounting that Britain is at risk of crashing out of the EU without a deal.
