Household incomes hit as wages rise at slower pace than inflation

This is the first fall since the third quarter of 2014
This is the first fall since the third quarter of 2014

The Brexit squeeze on household income has been laid bare as official figures revealed wages rose at a slower pace than inflation for the first time in two and a half years.

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.

Data 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.

“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.