ERC – Chart of the Week – UK Average Earnings Forecasts
Summary: The Economic Research Council’s third annual Clash of the Titans was held last night, and we received three sets of forecasts from three leading economic thinkers (you can see their forecasts in full here). In this week’s chart, we combine their predictions on earnings growth and inflation to see what they think will happen to real average earnings over the coming year.
What does the chart show?
The chart shows average weekly earnings (in GBP) for the whole economy, excluding bonus pay and arrears, adjusted for inflation so that it is in 2010 prices. The gray line shows the real growth over the past three years, while the three coloured lines show the predictions of the three competitors last night – light blue for Kevin Daly, dark blue for Stephen King, and orange for Ros Altmann.
Why is the chart interesting?
The real-terms fall in average earnings over the past four years has been partly responsible for the “Cost of Living Crisis” that some say the UK is facing. For the past three quarters, however, earnings have levelled off and are no longer falling in real terms. Our three forecasters have different views about what will happen next, although all agree Q4 2013 will be a bad quarter for real earnings growth. After that, however, Ros Altmann is the most optimistic, expecting the trough to appear in Q4 and a recovery after that. On the other hand, Kevin Daly thinks we will see a big drop in Q2 of next year (most of which we’ll make up the following quarter), while Stephen King is somewhere in the middle.
Source: The Economic Research Council