UK wages grew much more than expected and at a record annual pace in the three months to June, according to official figures that are likely to reinforce the Bank of England’s (BoE) concerns over the pressures fuelling inflation.
In April to June, annual growth in regular pay, which excludes bonuses, was 7.8 per cent, according to data published on Tuesday by the Office for National Statistics. That is the highest regular annual growth rate since comparable records began in 2001 and pushed nominal pay above price growth for the first time in more than a year.
Annual growth in employees’ average total pay, which includes bonuses, was 8.2 per cent in the three months to June, up from 7.2 per cent in the three months to May and the largest annual growth rate seen outside the coronavirus pandemic period.
The annual rate of growth in total pay was affected by one-off bonus payments made by the government to NHS staff in June, but both key measures of wage pressures far exceeded analysts’ expectations.
Economists polled by Reuters had forecast increases in total and regular pay of 7.3 per cent and 7.4 per cent respectively.
The BoE’s monetary policy committee carefully watches wage growth and labour market data for signs of persistent price pressures. The bigger than expected figures on pay saw market expectations of another quarter percentage point rise in interest rates in September jump to 99 per cent.
This was despite clear signs that the labour market continued to loosen, with an unexpected rise in unemployment, falling inactivity and declining employment.
Accelerating wage growth “supports our view that the Bank of England will deliver one more 25 basis point rate hike before it brings its tightening cycle to a close”, said Ruth Gregory, deputy chief UK economist at the consultancy Capital Economics.
She added that interest rate expectations could change after inflation data for July was published on Wednesday, with analysts forecasting a sharp slowdown in the rate of consumer price rises to 6.8 per cent from 7.9 per cent in June.
Separate data released on Tuesday by research company Kantar showed that the rate of grocery price rises stood at 12.7 per cent in the four weeks to August 6th, down 2.2 percentage points on the previous month.
Sterling rose 0.16 per cent against the dollar on the back of the workforce data. Markets also increased the odds of the BoE lifting interest rates to 6 per cent by the end of this year from 5.25 per cent now.
Tuesday’s data showed no sign of the expected easing of private sector pay growth. Annual average regular pay growth for the private sector was 8.2 per cent in the three months to June, the largest annual growth rate seen outside of the Covid-19 period. – Copyright The Financial Times Limited 2023
– Copyright The Financial Times Limited 2023
