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Published: Fri, May 19, 2017
Global Media | By Abel Hampton

British jobless hits 42-year low but wage growth lags behind inflation

British jobless hits 42-year low but wage growth lags behind inflation

That may be starting to limit pricing power for retailers, as annual increases in shop prices slowed to 3.1 per cent from 3.3 per cent.

Meanwhile, wage growth lagged inflation for first time since mid-2014.

However, data from the Office for National Statistics showed regular pay rising just 2.1 percent in the three months to March.

The figures are a turnaround from last month, when the ONS reported retail sales recording their biggest fall for seven years in the three months to March as rising living costs ate into household spending.

The number in employment meanwhile surged by 122,000 to a record high of nearly 32 million people, the ONS added.

Economists expect it to climb above 3%.

"This already appears to be dampening consumption, and is why we don't expect a United Kingdom rate hike before 2019". The consumer confidence index is forecast to fall to 70.8 in May from 71.3 in April.

Inflation hit an over three-year high of 2.7% in April, data showed earlier this week, the third consecutive month of above-target price growth.

Inflation, however, is still outpacing the gains in worker compensation, and the solid labour market is not much of help as low labour productivity is hindering wage inflation.

It also said that anecdotal evidence from retailers suggested that good weather contributed to growth.

However, Alan Clarke, economist at Scotiabank, said he still expected to see a consumer slowdown in the coming months, in turn weighing on the wider economy. Clothing and department stores saw sales volumes dip. This was the fastest growth since January 2016, and above the expected rate of 1.1 percent.

Spurred by the pound's steep depreciation in the wake of the Brexit vote a year ago, accelerating inflation means that Britons are now facing a living standards squeeze.

"We can not expect the consumer to be such a strong driver of growth in 2017 and 2018 as in the past few years. We therefore remain of the view that the pace of GDP growth has further downside into the end of the year".

ONS retail sales: "Retail has experienced another rise in sales thanks in part to the recent spate of good weather, with a 2.3% increase in sales, compared with March 2017".

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