Will wages continue to grow? The short answer is that it looks like they will. In the three months to end of December, average wages including bonuses rose by 2.1 per cent. This was more than four times the 0.5 per cent rate of inflation that month and the third consecutive month that growth in pay outstripped price rises.
Will this mean an increase in real pay? According to the EY ITEM Club, a widely expected spell of negative inflation this year combined with a gradual pick-up in nominal wage growth to 1.9 per cent from 1.2 per cent in 2014 will result in the first rise in real earnings since 2007. Inflation dropped to a record low of 0.3 per cent in January and some economists have predicted that it could fall into negative territory as early as next month. However, while nominal wages are forecast to grow by 3.7 per cent in 2018, this will still be below the pre-crisis average of 4.4 per cent.