Britons’ work income rose at its fastest pace on record in August, as historically low levels of unemployment helped household finances cope with inflation pressures.
Data from IHS Markit’s published today showed the tenth consecutive month of employment income gains, in spite of an increase in the feeling of job insecurity.
The figures will be welcomed by the Bank of England, as a further sign that pay pressures are building in the British economy. UK wage growth has remained relatively subdued in recent months, lagging behind inflation for much of this year and dragging on consumer spending.
Yet today’s survey also added evidence that the recent squeeze may be lessening, with the firm’s overall measure of household finances, closely watched by City economists, rising to its second-highest reading in the nine years it has been published.
The index rose to a reading of 45.9 in August, up from 45 in July. While it remains well below the 50 mark which indicates an improvement in Britons’ perceptions, the August reading was nevertheless the highest since January 2015.
Sam Teague, economist at IHS Markit, said the survey showed a “myriad of positive data around UK household budgets”, with pessimism towards current financial wellbeing falling to its lowest since January 2015.
However, the outlook on household finances worsened markedly, retreating from a 28-month high hit in July to the lowest level of optimism since March 2017.
The “strong labour market conditions gave households the confidence to continue ramping up spending levels in August,” Teague said, but the “spectre of higher living costs” and “ongoing Brexit uncertainty” still hang over consumers’ outlook.
Inflation pressures remained high, reflecting the fact that the consumer price index measure has come in above the Bank’s two per cent target for a year and a half.