Low wage growth to impact on housing market and consumer spending
- VocaLink take home pay index remains unchanged at 3.6 per cent in August
5 September 2007: The VocaLink take home pay index in August shows no increase on July’s figure. This, combined with the recent announcement that mortgage payments are taking a higher proportion of take home pay will have a negative impact on the housing market and consumer spending.
The VocaLink services sub-index, reflecting take home pay in the services sector, increased slightly to 3.3 per cent in August from 2.9 per cent in July. However, growth in this index has weakened significantly during 2007 from 4.9 per cent in February to 3.3 per cent in August.
The VocaLink industry sub-index, which reflects take home pay in the manufacturing sector declined to 4.0 per cent in August from 4.5 per cent in July. This is the second consecutive fall in the index which was 4.8 per cent in June.
Richard Cooper, head of marketing and communications at VocaLink, said: “The VocaLink take home pay index remains unchanged from last month. With the recent announcement that mortgage payments make up the biggest share of take home pay for 17 years, this will further squeeze consumer’s spending power.”
Douglas McWilliams, chief executive of cebr, the economics consultancy which analyses the take home pay index for VocaLink, said: “It is likely that mortgage and loan rates will increase and lending conditions will become stricter. In addition, the negative impact on corporate sector profits are likely to be reflected in low take home pay growth.”
VocaLink processes over 90 per cent of UK salaries and the VocaLink take home pay index is the most timely and accurate disposable income data available in the UK. It is based on actual payments made to employees on a three-month moving average compared with the same measure a year earlier. It is affected by changes in tax rates, National Insurance and other employer payments or deductions.
Follow this link to read the full take home pay index report.