Pay rise hopes hit by economy slowdown

The figures still mean real terms rises in workers' wage packets
The figures still mean real terms rises in workers' wage packets

Wage growth has slowed for the second month in a row, undermining hopes for an acceleration in pay rises this year, official figures have shown.

Labour market data from the Office for National Statistics showed total pay increased by just 1.7 per cent year on year in the three months to February.

It is a fall from the previous month’s figure of 1.9 per cent, which was also a decline from the 2.1 per cent increase seen in the three months to December.

The figures still mean real-terms rises in workers’ wage packets.

Pay growth has been running ahead of inflation for five months, with the gap widening at the start of this year as inflation has fallen to zero.

Meanwhile, today’s figures showed regular pay - excluding bonuses - had improved, picking up from 1.6 to 1.8 per cent.

But the Bank of England has pencilled in much stronger growth for average weekly earnings for 2015 at 3.5 per cent.

The further stalling in wage increases comes in contrast to figures also published showing continued strong jobs numbers.

Policy-makers have cited a likely acceleration for wage growth as one of the reasons why they do not think low inflation - seen as a boon for consumer spending - will not mutate into a damaging spiral of falling prices.

Kristin Forbes, a member of the Bank’s rate-setting monetary policy committee (MPC), wrote in a newspaper article last month that “most indicators suggest that the labour market is improving quickly”.