United Kingdom wages rising faster than prices as squeeze comes to end

Margate Beach during a hot spell in 2016

The Office for National Statistics said the unemployment rate unexpectedly fell to 4.2 percent, its lowest since the three months to May 1975. One of the BoE's policymakers, Ian McCafferty, said in a Reuters interview last week that he thought pay would grow slightly more quickly than the consensus view among his colleagues.

The markets are now pricing in an 85% chance of a Bank of England Base Rate rise next month.

Its records showed there were 32.26 million people in work, 55,000 more than for September to November 2017, and 427,000 more than for a year earlier.

The bank has been expecting a pick-up in pay as a drop in unemployment boosted workers' bargaining power. That means households should have a bit more in their pockets to spend following a period when price increases have eaten away at their purchasing power. Inflation over the period, as measured by the consumer price index, was around 2.9 percent.

Low-impact Eurozone construction output figures are the only other ecostats due for release tomorrow, which means that Pound Sterling could be left in charge of the GBP/EUR exchange rate, given the importance of the day's United Kingdom economic data.

Senior ONS statistician Matt Hughes said: "The labour market continues to be strong, and for the first time in nearly a year, earnings have grown slightly after inflation has been taken into account".

Average wages in Britain are rising faster than prices for the first time in about a year, official figures showed Tuesday, a development that will likely fuel expectations that the Bank of England will raise interest rates again next month.

The UK unemployment rate fell by 10 basis points to a fresh 42 year low of 4.2% when markets had anticipated that it would hold steady at 4.3%.

Economists said the weaker-than-expected headline pay figure was unlikely to knock the Bank of England off course from raising interest rates next month for only the second time since the global financial crisis.

'Accelerating wage growth, low and stabilising unemployment - the United Kingdom seems to be approaching full employment'.

Some economists warn that the headline figures do not account for a significant increase in part-time work rather than full-time, a possible reason for the recent lack of strong wage growth.

The pound, which hit a new post-Brexit high against the dollar on Tuesday morning, was little changed after the release.

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