Yahoo Finance Living standards set for welcome upgrade
Household finances are set for a long-awaited boost when wage forecasts are upgraded in the Budget.
Economists expect pay to rise by 3pc next year while inflation will slow to 2pc, meaning real incomes will rise by 1pc in 2019, as wages rebound more quickly than officials anticipated.
The Office for Budget Responsibility (OBR) predicted in March that it would take until 2022 before real earnings growth hit that level.
When a fuller picture of living standards is included, economists predict real household disposable income growth of 1.4pc next year, almost three times the OBR’s forecast of 0.5pc.
“Personal incomes were remarkably weak through 2016 and 2017, growing [in cash terms] by 2.25pc,” said economist Peter Dixon at Commerzbank. “We think this year that will be closer to 4pc and similar next year.”
This recovery has been caused by a strong jobs market, with very low unemployment at last pushing employers to raise wages.
The impact of imported inflation is also fading. Official data last week showed regular pay for the average worker rising by 3.1pc in the 12 months to August.
“Maybe consumers will think there is a precautionary motive here to partially rebuild their savings buffers,” said Ross Walker, head of UK and European Economics at NatWest.
