Inflation Erodes Real Wage Growth

Wednesday, 12th April: Inflation yesterday, employment data today, and it brought with it the reality that inflation is beginning to wipe out any real wage growth. The unemployment rate for the period December to February held steady at 4.7%, while the number of people unemployed fell to 1.56m. However, the Office for National Statistics (ONS) also revealed that the average weekly earnings for employees rose by 2.3% (including bonuses), (and by 2.2% excluding bonuses). But yesterday, figures showed inflation was currently at 2.3% as a consequence of a falling pound, essentially meaning average weekend earning increased by 0.2%. Again, sterling recovered well from the news and continues to trade marginally higher against both the euro and US dollar.

Tesco fell to the foot of the FTSE 100, reporting a fall in pre tax profit, taking a £235m charge for overstating its profits in 2014. However, excluding the one-off charge, Tesco said it has beaten operating profit targets whilst reporting a 1% rise in like-for-like sales (excluding new store openings). The UK’s biggest supermarket has recently announced plans to acquire wholesaler Bookers, much to the objection of some of its biggest shareholders. Nevertheless, the financial performance of the group seems to be doing well at an operating level, despite a balloon in its pension deficit. Shares have fallen >10% year-to-date and closed the day -5.74% at 184.4%.

Tesco dragged the FTSE 100 lower as it closed -0.22%. The FTSE 250 closed +0.61%. In the US, indices are trading lower on the day US Secretary of State Rex Tillerson visited Moscow, receiving a torrent of criticism from Russian officials over US intention’s on Syria.