There was some fanfare in the UK press last month when the average wage caught up with inflation. Today’s numbers may cause a few party balloons to burst as the numbers flatten off. It’s one thing having wages match inflation but that’s almost a case of breaking even after inflation was riding so high. Make no mistake, that is a positive but for a recovering economy you want to see the population getting ahead of inflation.
We may still see wages pass above inflation but I feel that’s probably going to be more because inflation has fallen rather than wages have risen. We may get a bit of both though. That won’t stop the politicians for claiming victory that wages outstrip inflation but they won’t be fooling anyone on this site.
UK wage vs inflation 14 05 2014
I’m expecting Carney to paint a similar picture to Draghi over inflation, although we’re not yet in the same boat as Europe just yet. If he mentions the currency and its effect on inflation then cable could go through the floor. Any signs that they will match their ECB comrades in action is going to sink the pound. At the least I’m expecting a dovish stance while praising the ongoing recovery.
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