Wages to increase faster than inflation
14/04/2014
Wages could begin growing faster than inflation as early as this month, according to economic forecaster EY ITEM Club.
They predicted that average earnings would increase by 1.7% this year, overtaking average inflation forecasts of 1.6% for 2014.
The economic forecaster also predicted that the UK economy will see “decent but unspectacular growth” of 2.9% next year, with the majority of growth being driven by consumer spending.
‘A firmer footing’
EY ITEM Club’s Chief Economic Adviser commented that “the recovery has been financed by a fall in the amount households save, but it appears to be moving to a firmer footing."
He also said: "The consumer upturn will be given a boost from real wages and rising employment, while investment is finally kicking in."
It has been further predicted that inflation will be kept under control due to falling prices of commodities such as petrol, food and energy - driven by the strong pound.
They also expected the Bank of England to keep interest rates at the benchmark low of 0.5% until the third quarter of 2015.
Avoiding a Housing Bubble
However, they did also predict the housing market could slow down as the ‘Mortgage Market Review’ comes into place on April 26th. This will result in tighter criteria being implemented in order to encourage responsible lending.
The new mortgage lending rules set by the Financial Conduct Authority (FCA) mean that borrowers will face stricter checks to ensure they can afford mortgage repayments.
It has been claimed that these rules are “crucial to keeping a lid on the market” and avoiding a housing bubble. This is particularly the case in London where property prices have been rising considerably faster than anywhere else in the country.
Mr Spencer said: "The FCA will assume crucial importance to ensure affordability is scrupulously checked". He said that if correctly implemented, the rules could eventually constrain London house prices, helping to avoid complications when interest rates do eventually increase.
Need Advice
If you need to ask a financial question then please contact our financial advisers online or over the phone to get help with your query.
Share this..
Related stories
What Will The Mansion House Speech Tell Us?
As the Chancellor Alistair Darling ventures East over the City to give the Mansion House speech later this evening, many economists will be hanging on his every word to see exactly what the government hope to do about the ailing UK economy. This keynote speech will be the most important which Alistair Darling has ever delivered and needs to offer a balance between realism and ideas for recovery i...
Read MoreUK exchange offices stop selling €500 banknotes
In a move which may well be a sign of the future it has been revealed that UK currency exchanges have stopped selling €500 banknotes because of their connection with organised crime. The Serious Organised Crime Agency believes that 90% of such notes in the UK are now in the hands of organised criminals who are using them to hide profits and move funds easily around Europe. The note, which...
Read MoreThe Co-op group sees £124 million profit
09/04/2015 The Co-Operative group made profits of £124 million in 2014 after it lost £255 million the previous year. The Co-op reported that its food and funeral businesses performed well last year, as sales in food rose by 0.4%. The only part of the company that lost money was its insurance business. The Co-op is in the midst of a three year plan to help steady the business after 2013...
Read MoreBudget Headlines : Pensioners savings allowance up to £10,000
Pensioners savings allowance up to £10,000...
Read MorePetrol, milk and furniture cause MPC fears
Sharp increases in the cost of factory-gate goods have lead to a 3.1 per cent reading for the consumer price index in March, sparking concerns that the monetary policy committee (MPC) will be pressurised to rise the interest rate yet again. Prices which showed the biggest gains were petroleum products, milk and furniture, according to the Office for National Statistics (ONS), which pushed the over...
Read More