The deceleration in wage growth is expected to influence the Monetary Policy Committee’s (MPC) decision on the Bank Rate next month, according to economics research firm Pantheon Macroeconomics.
Data indicates that the headline rate of year-over-year growth in average weekly earnings, excluding bonuses, reduced marginally to 7.8% in August from an upwardly-revised 7.9% in July. This outcome aligns with the general consensus.
In addition, there has been a reported decrease in payroll employee numbers. An estimated drop of 11K was observed month-to-month in September, slightly missing the consensus which projected a +3K.
Furthermore, the publication of crucial data from the Labour Force Survey, which covers employment and unemployment statistics, has been postponed.
The Office for National Statistics (ONS) has attributed this delay to concerns regarding a drop in the response rate for the survey.
Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics, said: “Signs that wage growth is losing momentum should persuade the MPC to keep Bank Rate at 5.25% again next month.
“Average weekly earnings excluding bonuses increased by 0.34% month-to-month in August—or 4.2% on an annualised basis—well below the 0.66% average increase in the first seven months of 2023.
“August’s rate of increase remains too fast for the MPC to tolerate indefinitely, and might well be revised up, as has usually been the case recently. But wages lag changes in labour market slack, which is continuing to accumulate.”
Reaction
Stephen Perkins, managing director at Yellow Brick Mortgages:
“This latest wage growth data shows above-inflation increases in wages and therefore spending power. This creates the real danger of another base rate rise from the Bank of England’s Monetary Policy Committee, unless the next inflation print due tomorrow can settle its nerves.”
Wes Wilkes, NTWRK CEO at Net-Worth NTWRK:
“This consistently sticky wage growth is a headache for the Bank of England, and could be bittersweet for borrowers. While it’s good news to see wages growing in real terms, consumers feeling flush, albeit in relative terms, has the potential to stoke the fires of inflation once more. The worry is that this could cause the Bank of England to consider more needs to be done with regard to tightening monetary policy and see them raise rates further.”
Peter Stamford, director and mortgage expert at Moor Mortgages:
“With this latest data, the Bank of England has got a tough call on the base rate decision at the next Monetary Policy Committee meeting. I think they will hold, but it will be a close one. Borrowers will be watching on nervously.”
Riz Malik, founder & director at R3 Mortgages:
“As labour market growth seems to be cooling, if inflation follows we could be in for another ‘hold’ decision in November.”
Craig Fish, director at Lodestone Mortgages & Protection:
“Whilst it’s positive news that average earnings growth is roughly as expected, we aren’t quite out of the woods yet. It’s great news that people have more money in their pockets, even if it doesn’t feel like it, but Jeremy Hunt’s message this morning of ‘we must stick to our plan’ is a warning that another rise isn’t completely off the cards. That will be down to the much more important inflation data, which we await with bated breath.”
