ECONOMIC OUTLOOK
WORKERS could see their pay increase faster than inflation in 2018, as employers look to attract and retain staff at a time of low unemployment, according to an annual survey of businesses.
Just over half of companies said they would increase pay at or above the rate of inflation in the coming year, found the survey by the CBI employers’ group and recruitment agency Pertemps.
Pay growth is expected to head towards 3%, while inflation is forecast to come down to 2.4% by the end of 2018.
Wage growth has edged up recently, according to official data. Average weekly earnings excluding bonuses rose by an annualised 2.3% in the three months to October, up from 2.2% in September. Including bonuses, wage growth was 2.5%. But, with inflation rising to 3.1% in November, pay has not been keeping pace with price rises.
“Inflation is likely to be close to its peak,” said the Bank of England Monetary Policy Committee (MPC) last Thursday as it kept interest rates on hold at its December meeting.
However, the committee said that “further modest increases” in interest rates are likely as it seeks to bring inflation down to its 2% target in the next few years.
Meanwhile, the number of people in work fell 56,000 in the three months to October, according to official data. However, job vacancies rose to a high of 798,000, suggesting that the slowdown in employment may not last long. The unemployment rate remains at a low of 4.3%.
The Scottish government proposed using its powers to vary income tax rates for the first time, with higher earners paying more than elsewhere in the UK and lower earners paying slightly less. Under plans announced in Scotland’s draft budget, the higher and top rates of income tax would rise by one percentage point, to 41% and 46% respectively. New rates of 19% and 21% will also be introduced.
Outgoing US Federal Reserve chair Janet Yellen announced an increase in US interest rates last Wednesday. The Fed cited a strong US jobs market and growth in household and business spending for its decision to raise rates by a quarter of a percentage point, to a range of 1.25% to 1.5%.
The Fed also predicted stronger US economic growth than previously envisaged over the next three years. Growth in 2018 is now forecast at 2.5%, well above its previous prediction of 2.1%.
UK retail sales were higher in November as Black Friday offers tempted shoppers.
Sales volumes increased 1.1% in November compared with October, while the annual increase was 1.6%, according to the Office for National Statistics (ONS).
Sales of electrical household appliances increased strongly, the ONS reported. And non-food sales such as clothing and footwear came back from a slump in October to rise by the annual rate of 2.3% in November.