Economic Monitor
Economic Monitor: Real wage growth to improve
The economic outlook for the UK has improved over the last month, with several indicators pointing towards recovering household incomes and a gradual improvement in consumers' financial outlook. The BRC Customer Sentiment Monitor for April suggests that most consumers expect the economy to improve over the coming months. Momentum has held up, and the UK’s return to growth over Q1 appears to have continued into Q2.
Meanwhile, real wage growth has now eclipsed 2% and is likely to remain strong as we expect inflation to fall sharply in the Consumer Price Index (CPI) data this month. The National Living Wage uplift, effective from last month, will support nominal wage growth. Additionally, the recent cut to national insurance suggests the working population will have greater spending power, in the near term. On the cost of living, the lowering of Ofgem’s energy price cap last month will also offer a welcome reprieve for households’ bills.
However, geopolitical risks remain high. Oil prices have risen in recent months, and fuel prices at the pump are higher as a result. Disruption in the Red Sea persists, and many shipping operators are continuing to follow longer routes. However, shipping costs are around 40% lower than their most recent peak, though remain 200% higher than before the Israel-Hamas conflict.
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