A RECOVERY based on the housing market and consumer spending will be "hard to sustain" given the pressure on real incomes, according to EY ITEM Club research published today.
The economic think-tank recommends the Bank of England's Monetary Policy committee should not raise interest rates until real wages rise and the recovery broadens into exports and business investment.
However the ITEM Club says unemployment may well fall below the BoE's 7% threshold for considering an increase in the base rate.
But it warns any rate increase this year risks unbalancing the recovery and as a result expects policymakers to leave the 0.5% record low unchanged until next autumn.
By then the ITEM Club predicts there will be broader and more sustainable economic progress.
Peter Spencer, chief economic advisor to the ITEM Club, said : "The weakness of real earnings is proving to be the Government's Achilles' heel and could prove to be the weak spot in the recovery."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article