This comes via VocaLink:
- Annual growth of the VocaLink FTSE 350 Take Home Pay Index falls to 2.2% for the three months to September – down from 2.7% for the three months to August
- The VocaLink Manufacturing Index is unchanged in September, remaining at 2.1%
- Three month annual growth on the VocaLink Services Index falls from 2.7% in August to 2.3% in September
- The VocaLink Public Sector Index enjoys a modest rise with annual growth of 2.0% for the three months to September, up from 1.7% for the three months to August
These numbers are well under the inflation rate and show British consumers becoming victims of stagnating and negative real wage growth. Manufacturing inflation in a wage deflationary environment doesn’t reduce the real burden of household debts. If you are going to try asset price reflation as the Bank of England is with QE2, in the absence of wage gains, it won’t be sustainable. You need to increase labour’s share of the gains from nominal GDP so that households have higher incomes to support debt service and pay down debt.
Obviously, having government bidding for labour resources adds net financial assets and increases the numerator of debt/income calculations. In the absence of this, defaults and writedowns i.e. decreasing the denominator is the only way to work off the private sector debt which is the genesis of the financial crisis.