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United Kingdom wages rising faster than prices as squeeze comes to end

United Kingdom wages rising faster than prices as squeeze comes to end

"A lot of the detail in the report suggests the labour market is still tightening", Philip Shaw, an economist with Investec, said.

According to the latest figures from the Office for National Statistics, average weekly earnings excluding bonuses rose by 2.8% in the three months to February, unchanged from the three months to January. One of the BoE's policymakers, Ian McCafferty, said in a Reuters interview last week that he thought pay would grow slightly more quickly than the consensus view among his colleagues.

Unemployment has fallen steadily in the United Kingdom since peaking at 8.5 per cent at the end of 2011, as the global financial crisis led to workers being laid off.

The Eurozone data set for release tomorrow may not have much of an impact, given that it is mostly finalised consumer price index figures for March; only an unexpected change on the previous estimates is likely to cause much turbulence. By the early months of 2017, inflation was rising faster than wages - a net drag on the economy as households spent less.

Anticipation of a rate hike mounted after the BoE warned in February that it could raise rates further and faster than markets were gave it credit for if the United Kingdom inflation picture evolved in line with its most recent forecasts. The figures mean that United Kingdom workers are now getting a small real wage rise.

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Senior ONS statistician Matt Hughes said: "The labour market continues to be strong, and for the first time in nearly a year, earnings have grown slightly after inflation has been taken into account".

Real earnings started shrinking a year ago, when inflation overtook pay rises after sterling crashed, but the trend finally reversed in the three months to February. "The unemployment rate fell, too, and is at its lowest since 1975".

Economists said the weaker-than-expected headline pay figure was unlikely to knock the Bank of England off course from raising interest rates next month for only the second time since the global financial crisis.

Tuesday's data comes just weeks ahead of the May interest rate decision from the Bank of England May that is widely expected to yield another 25 basis point increase in the Bank Rate, which would leave the UK's main interest rate at 0.75%.

"The big question is whether the forward momentum on hiring and wage growth can be sustained", he added. "Pay growth appears to be finally benefiting from the strength of jobs growth", says Ruth Gregory, a United Kingdom economist at Capital Economics.