Household incomes hit as wages rise at slower pace than inflation
The Office for National Statistics (ONS) said wages excluding bonuses rose by 2.1% in the three months to March, while average weekly earnings in real terms - adjusted for inflation - fell by 0.2%.
This is the first fall since the third quarter of 2014.
The figures come after Bank of England governor Mark Carney warned last week of a “challenging time for British households” in 2017 as Brexit-fuelled inflation will eat into finances.
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Hide AdData on Tuesday revealed Consumer Prices Index (CPI) inflation jumped to 2.7% in April - up from 2.3% in March and the highest level in nearly four years.
The cost of living has surged as the Brexit-hit pound has pushed up the price of food, clothing and energy.
The Bank has predicted that inflation will peak at just under 3% in the final three months of 2017, far outstripping weak wage growth.
Ben Brettell, senior economist at Hargreaves Lansdown, said: “Household budgets look certain to be squeezed further in the coming months.
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Hide Ad“The economy has surprised on the upside since last summer’s referendum, powered by a resilient consumer, but it looks like households are now starting to feel the pinch from the current bout of inflation with gross domestic product growth slowing to 0.3% in the first quarter of this year.”
There are mounting signs that a slowdown in consumer spending is already under way, acting as a drag on the wider economy.