The chart below sums up the key reason for this New Year cheer. It shows nominal wage growth (based on year-on-year comparisons of average weekly earnings for the previous three months, including bonuses) plotted against inflation. The gap between the two lines is real wage growth. A few blips aside, this has been negative since mid 2008, making for the longest period of falling real wages since at least 1964, when comparable Office for National Statistics data begin.
Yet the lean years - of which there have been a Biblical seven - may now finally be over. Admittedly, there have been flashes of real wage growth before in the current cycle, all of which have proved fleeting. And the good news this time round has less to do with headline wage settlements, which remain dismal by pre-crisis standards, than with inflation, which is at its lowest since mid-2002.
So the current positive trend does at least look sustainable. After a long period of volatility, average weekly earnings have now risen for six consecutive months. And that makes sense, because unemployment was just 6 per cent for the period from August to October - down from 7.3 per cent the previous year. Finally, the dramatic fall in the oil price in the second half of 2014 should lower companies' costs this year, allowing them to invest more in staff while keeping prices - and hence inflation - low. Against such a backdrop, it seems eminently plausible that employees will negotiate better real pay deals.
The other key reason economists are bullish is the prospect that interest rates will remain low well into 2015. With inflation so weak, not a single of those polled by the FT thought rates would rise in the first half. This suggests higher real wages will flow straight through into disposable income for households. In 2009-10, the impact of falling real wages was more than offset by plunging interest rates, which allowed households to refinance their mortgages far more cheaply (see chart). This effect will work in reverse when interest rates rise.
The most obvious beneficiaries of rising disposable incomes are retailers. In fact, there is some evidence they are benefiting already. The last official statistics on retail sales, for November, showed year-on-year volume growth of 6.4 per cent - the highest since May 2004 (though the figures were boosted by the timing of Black Friday, which may have brought forward sales from December). The question is how well retailers can manage deflation. Because high-street prices have been falling in an environment of cut-throat discounting, year-on-year sales growth, at 4.3 per cent in November, was much weaker than volume growth.
The next few weeks will bring a lot of updates from retailers on their Christmas trading. First off the blocks was Next (NXT), which guided up investor profit expectations very slightly after beating its previous downbeat sales forecasts for the two-month period ending Christmas Eve. That bodes well, not least because retailers desperately need profit upgrades to justify their current share price multiples. Don't forget, though, that Next's background in catalogue sales has placed it at the forefront of the digital retailing revolution, making it somewhat unrepresentative of your average high-street chain.
And what if the economists are wrong? Commodity prices, in particular, are notoriously volatile - nobody was predicting an oil-price collapse a year ago, after three years of relative stability. If oil production contracts faster than expected and traders start betting on a recovery, this cheery New Year consensus could start to look naïve.
