Last week saw global financial markets return to panic mode, as concerns about the faltering euro-zone economy, heightened geopolitical risks, the spread of the Ebola virus and falling oil prices came to the fore. Amidst the gloom, however, a piece of good news on the UK economy may well have been overlooked – namely that the squeeze on real earnings is nearly over.
With signs that productivity has finally started to recover, many industries already seeing above-inflation pay rises, labour market slack continuing to be used up and survey measures of pay remaining strong, we remain optimistic that nominal wage growth will pick up. And with inflation set to fall below 1% by the end of this year, real wages should begin to post sustained rises.
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