Another Bank of England inflation report, another set of rosy forecasts for earnings next year. Just as 2014 was supposed to be the year of the pay rise, now it seems 2015 will be the year when things turn positive.
And, according to the Bank, wages won’t just creep into positive territory next year, they are going to take something of a jump upwards. In the last quarter of 2015 the Bank expects nominal wage growth of 3.25% at a time of inflation of 1.4% – so a gear shift from the current position of at best flat-lining real pay to healthy growth of roughly 1.8% in a year’s time.
How sceptical should we be? The Bank’s Chief Economist has been admirably forthright in highlighting his organisation’s own habit of promising sunshine tomorrow, with spring always just around the corner but never coming to pass, as the chart below from his recent speech illustrates. At some point, though, things have to brighten. And every passing month in which unemployment continues its fall and GDP continue to rise makes a degree of optimism about the following year that bit more plausible.
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