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Wages could beat inflation by end of April

 

Economic forecaster The EY Item Club has said a ‘long period of low inflation’ could mean that average earnings will rise faster than the cost of living in the near future.

 

Inflation has overtaken average pay increases over the years since the financial crisis.

 

Paul Spencer, economic advisor, said: ‘We expect wage growth to overtake CPI inflation as early as Apirl. Until now the recovery has been financed by a fall in the amount households save, but it appears to be moving to a firmer footing’.

 

Roger Bootle, managing director of Capital Economics, believes the difference could be back to its previous average of 2%. ‘In other words, the so-called cost of living crisis could soon be over’.

 

Chancellor George Osborne is expected to capitalise on the positive forecasts which seem to further vindicate the austerity plans he put in place at the start of this Government, which have been heavily criticised by Labour.