Strong employment levels and low inflation are clashing dramatically with the stunted growth of real earnings. While wages have historically risen at the same rate of employment, the last three months have seen little change in the size of pay packets. This could put pressure on household budgets and could see consumer markets stretched even further.
For the last year, consumer sectors have struggled with stunted spending behaviour and the rising popularity of online retailers. Many household names, from New Look to Toys R Us have been forced to submit to insolvency or restructuring procedures as a result of low profits and a disappointing high street performance.
With inflation and unemployment low, there was a slight hope for an upturn in the industry, with consumer sentiment lifted by the recent warm weather and lucrative events such as the Royal Wedding and the FA World Cup.
Unfortunately, the weather has cooled and employers are keeping a tight rein on how much they pay employees. Wage growth slowed considering in the last three months, with the Office for National Statistics reporting an increase of only 2.4 per cent compared with 2.5 figure from last month.