United Kingdom unemployment hits 40-year low

Posted April 19, 2018

United Kingdom inflation slowed to the weakest level in a year in March as the Bank of England prepares to lift interest rates next month.

Real earnings started shrinking a year ago, when inflation overtook pay, but the Office for National Statistics says that the trend was reversed in the three months to February.

The UK's consumer prices inflation stood at 2.5% in March, down from 2.7% in February, the lowest rate in a year.

At the same time, notes Pantheon Macreconomics, the decline in inflation represents a passing of the United Kingdom economy's post-referendum import inflation. "Inflation looks to be falling back as predicted, but with wages picking up and unemployment still falling, it's possible this tightness in the labour market could eventually push inflation back up", he said in a statement.

"Inflation fell to its lowest rate in a year, with women's clothing prices rising slower than usual for this time of year", ONS Head of Inflation Mike Hardie said in a statement.

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Philip Smeaton, chief investment officer at Sanlam UK, adds: "With inflation falling back towards the 2% target and wage growth overtaking inflation for the first time in more than a year, it finally looks like the squeeze on living is easing".

Despite an interest rate rise looking likely in May, Khalaf said the Bank will remain "wary of moving too fast too soon" and is likely to move "at a slovenly pace". The employment has risen to record highs between December and February, with 55,000 jobs created in the economy.

And for many millions of people the last decade of anaemic incomes growth has left wages pretty much where they were in 2007.

"At the same time the Bank would dearly love some more firepower to counter the next economic downturn, whenever that may be".

TUC general secretary Frances O'Grady said: "Unions have negotiated pay rises for workers across the United Kingdom, from the counters at McDonald's to the factory floor at Ford".

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On balance, however, a quarter-point hike in the benchmark rate to 0.75 percent is still expected, not least because wage growth at 2.8 percent is outstripping price rises.

He tweeted that the figures "place little pressure on the MPS to hike next month".

"Sterling fell sharply on the news, losing more than half a cent against the dollar".

For the first quarter as a whole, annual inflation in the United Kingdom averaged 2.7% - somewhat below the forecast of 2.92% that the Bank of England made in February. The expected rate was 4.3 percent.

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