Inflation down, wages up

The UK inflation rate has fallen from 2.8% a year ago to 1.6% in March 2014, according to the Office for National Statistics (ONS). It is now at its lowest rate since October 2009.

The inflation rate has now fallen for six months in a row, the longest consecutive fall since records began. It is also means that inflation has been below the Bank of England's 2% target rate for the last three months.

The Retail Prices Index (RPI) also fell to 2.5% from 2.7%.

Meanwhile the ONS announced today that weekly wages, including bonuses, rose by 1.7% in February, up from January’s figure of 1.4%. So apart from a couple of months in 2010, this is the first time that earnings have been ahead of inflation in the last six years.

The 1.7% figure does include bonuses, however, and without those, wages rose by 1.4%, so below the rate of inflation.

Elsewhere, unemployment in the UK fell to a five-year low of 2.24m in the three months to February, meaning the unemployment rate now stands at 6.9%.

The Daily Telegraph reported that slower rises to the cost of living will make savers hundreds of pounds better off, despite the low savings rates. It quotes from a survey by Moneycomms which says that the “real” return savers can earn from a £20,000 deposit is now £168 higher than a year ago.

Perhaps more importantly, however, this demonstrates the vulnerability of wealth held in cash bank accounts.

Inflation always acts as a corrosive influence on money. If you do not earn a return higher than inflation, the true value of your cash declines, which is why many people have looked towards equity income funds amongst other options to earn decent returns.

< back to News & Views

News Feed


Bates looking at Post Office private prosecutions

Alan Bates, who has led a campaign for justice for decades, says he wants people to be held to account.

News & Views

April 10, 2024

How to use the new tax rules efficiently in the new tax year

We look at the changes to the tax rules at the start of the new tax year and how to make sure your savings and investments are as tax efficient...
Read more