Pay growth accelerates but employment slips again - ONS

Consumer spending power is being aided by a stronger than expected rise in average wages, official figures suggest.

The Office for National Statistics (ONS) reported that wage levels, excluding bonuses, rose by an annual rate of 2.7% in the three months to November - the strongest increase since August 2015.

The figure was 2.8% when the effects of bonuses were included.

The announcement is useful for economists, who had expected a slightly weaker increase, as it suggests that rising prices are not yet eroding consumer spending power to the extent some had feared.

The ONS reported a day earlier that its headline rate of inflation had risen to 1.6% in December.

It is predicted by some experts to nudge 3% later this year as the effects of the weak pound on imported goods result in higher costs for businesses and consumers alike.

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The wider employment figures were largely positive but showed a small drop - for the second month in a row - in the number of people in work, though the employment rate was steady at its record high of 74.5%.

The ONS said the jobless rate was also static - at its 11-year low of 4.8% - while the number of people without a job fell 52,000 to 1.6 million.

The number of people claiming unemployment benefit fell by 10,100 in December after rising the previous month.

Commenting on the figures, ONS senior statistician David Freeman said: "While employment is little changed on the quarter, the rate remains at an historical high.

"The rate at which pay is increasing continues to pick up in cash terms, though it remains moderate."

The Bank of England has been among those warning that the consumer-driven growth in the economy since the Brexit vote is under threat from rising prices and higher debt levels.

However, the ONS data is the latest to show greater resilience for the economy than many had expected.

Dr Howard Archer, chief European and UK economist at IHS Markit (Stuttgart: A1139A - news) , said the ONS figures provided a mixed picture and he predicted more caution from employers in the months ahead.

He said: "Wage rises are not keeping pace with the pick-up in consumer price inflation so consumers' purchasing power is starting to be diluted.

"We suspect that declining consumer purchasing power will be a key factor weighing down on the economy in 2017."