Thu. Sep 28th, 2023


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Wages are finally rising faster than inflation for the first time in a year

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New inflation figures, due for release next week, are expected to show a fall in the consumer price index from 7.9 percent in June to about 6.8 percent last month.

At the same time, average earnings data, to be released the following day, is likely to show a rise in wages of slightly over 7 percent.

The figures would represent the first time in ­14 months that earnings have grown faster than inflation since higher energy prices triggered the cost-of-living crisis.

Economists said they now expect wages to grow faster than inflation until at least 2025.

Ashley Webb, economist for the independent consultancy Capital Economics, said: “We are moving in the right direction and we have now reached an inflection point where incomes are going to start rising higher than prices.

“There isn’t a perfect way to define the cost-of-living crisis, but a good proxy is when CPI inflation is above average earnings growth.”

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Paul Johnson, director of the Institute for Fiscal Studies, said that after two years of squeezed living standards for some, groups of people would soon “stop getting poorer”.

He explained that those who work and who have not been hit by rising mortgage costs may feel as if the cost-of-living crisis has eased.

“But, people coming off existing fixed-rate mortgages will not be better off as any benefit they gain from rising wages will be more than offset by an increase in their housing costs.”

This month’s inflation figures are expected to ­fall significantly because they will take into ­account July’s reduction in Ofgem’s energy price cap to £2,074.

This is almost £500 lower for the average dual-fuel household than the government’s energy price guarantee that has regulated prices since ­last October.

In further good news, experts predict that Friday’s GDP figures will show a 0.2 percent rise in June.

Economists said resilient consumer spending and lower fuel prices helped shore up an economy that in recent months narrowly avoided recession.

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