Pay overtakes inflation for first time in nearly two years

Average pay growth rose above inflation for the first time in almost two years, in a sign that the squeeze on living costs may be starting to ease.

Wages rose by 7.8% between June and August, according to official figures.

It is higher than average inflation over the same three months, which measures the rate at which prices rise.

The last time that pay growth overtook price increases was in October 2021, which was during the Covid pandemic.

However, the rise in wages is an average and does not mean that cost of living pressures are subsiding for everyone.

There continues to be a big gap between public and private sector pay.

Wage growth for public sector workers reached 6.8% between June and August, which the Office for National Statistics (ONS) said was the biggest increase since comparable records began in 2001.

But the average pay rises for private sector employees was 8%.

People working in finance and business services saw the largest rise in annual pay, followed by those in the manufacturing sector.

The rate of Inflation has been slowing but, at 6.7% for the year to August, it remains more than three times higher than the Bank of England’s 2% target.

New inflation figures will be released on Wednesday which are expected to show price rises continuing to slow.

Commenting on the wage figures, Chancellor Jeremey Hunt, said: “It’s good news that inflation is falling and real wages are growing, so people have more money in their pockets.”