Real wages grow but there is still a real problem to solve
Sky's Adam Parsons visits Doncaster to see how the market town's traders have been faring during the squeeze on household budgets.
Tuesday 17 April 2018 19:42, UK
In the heart of Doncaster, Maria Bevan is packing up her stall.
She sells homewares - decorated cushions and fabric products that she makes herself. Today has been a bad one.
"I've sold nothing all day," Maria tells me. "There's been no passing trade, nothing. It's been very difficult over the past year."
On the neighbouring stall, her friend Jean Slingsby has also had a bad day, trying to sell children's clothes.
The customers just have not been around. A market that used to bustle every day now feels quiet.
It is a story repeated across the UK.
For the past year, as wages have lagged inflation, consumer spending has changed.
Many shoppers have become more wary with their money and retailers have suffered the consequences.
Toys R Us and Maplin are among the names disappearing from our high street - victims of changing tastes but also of our squeezed budgets.
Inflation measures the speed at which prices are going up. It is of fundamental importance to our economy but also to all of our lives.
If our income does not keep pace with inflation, then we cannot buy as much stuff today as we could yesterday. From a practical sense, or - in the language of an economist - "in real terms", we would be getting fractionally poorer.
For the past 15 months or so, that is exactly what has happened. Wages rose slower than inflation, and consumers felt squeezed.
So, on paper at least, the end of that wage squeeze should be something to celebrate. Or, at least, to meet with relief.
:: Wages overtake inflation to end squeeze
Patrick Queen has been selling meat from Doncaster's market for 40 years. His business has survived a variety of challenges over the years but he thinks it has never been harder to part customers from their money.
"I have been through a few disasters over the years," he told me. "There was the miners' strike and recessions. This market even got burned down, but we kept going.
"Right now, this is worse than ever. After each of those other disasters, we bounced back quite quickly, but this time around it's been two years of struggling and I don't think we've hit the bottom."
He waves his hand around the market, pointing towards a large cluster of stalls that now stand empty.
"Half the shops here have now closed. People don't have the money to keep the staff on. I'm just trying to look forward and not look back," he said.
It is a sentiment echoed by another butcher, Philip Armstrong. Dressed in his trademark bow tie, he is a veteran of 35 years at the market, and says there's a very good way of gauging the health of the economy - what meat do people buy.
"More customers now trade down and ask for cheaper cuts or mince," he says.
"They keep their money for special occasions - Easter, birthdays, Christmas. We have had bad times before, but they have never lasted for as long as this."
There is comfort in the return to real wage growth, but we are still in a curious, unpredictable time.
Unemployment is very low and that, in theory, should be driving wages much higher. The fact that it isn't could be down to low productivity, weaker union power, globalisation, self-employment, zero-hours contracts or perhaps the lingering after-effects of the financial crisis a decade ago.
As ever in economics, there are more theories than certainties.
But what is sure is that the Bank of England is analysing all this data with great interest.
Next month, it will have to reflect on whether to raise interest rates, and that is a decision that will affect everyone - houesbuyers, savers, City financiers, butchers and market traders alike.