Basic pay growth slows for first time in a year in UK
Growth in pay in Britain, which the Bank of England is watching closely as it weighs up whether to pause its run of interest rate hikes next week, lost pace in the three months to January, official data showed on Tuesday (14).
Basic pay, excluding bonuses, rose by 6.5 per cent compared with 6.7 per cent in the three months to December, representing the first slowdown in the that measure since late 2021.
Total pay grew by an annual 5.7 per cent in the November-to-January period, slowing from 6.0% in the previous figures and the weakest increase since the three months to July last year, the Office for National Statistics said.
Economists polled by Reuters had expected basic and total earnings to rise by 6.6 per cent and 5.7 per cent respectively.
Britain’s unemployment rate held at 3.7 per cent in the three months to January, close to its lowest in almost five decades, the data also showed.
Economists polled by Reuters had mostly expected the rate to rise to 3.8 per cent.
The BoE is expected to raise borrowing costs on March 23 by a further quarter of a percentage point to 4.25 per cent although investors have cut their bets on such a move sharply after the collapse of US lender Silicon Valley Bank.
Interest rate futures showed investors were putting the chance of the BoE pausing its rate hikes next week at about 40 per cent while a quarter of a percentage point increase in borrowing costs was seen as a 60 per cent possibility.
Yael Selfin, chief economist at KPMG UK, said while the ONS data showed a slowing of pay growth, more recent measures showed little change recently.
“Coupled with stronger-than-expected GDP data, this should provide enough evidence for the Bank to raise rates when it meets next week,” Selfin said.
But Martin Beck, with forecasters the EY ITEM Club, said a BoE rates pause was now likely after 10 back-to-back hikes.
“These moves follow other developments, including an unexpectedly significant decline in the services sector inflation in January,” Beck said.
Sterling rose against the dollar and the euro shortly after the data before falling back.
Finance minister Jeremy Hunt is expected to announce measures in his budget statement on Wednesday that will seek to get more people into work, easing the inflationary pressure in the labour market.
“The jobs market remains strong, but inflation remains too high,” finance minister Jeremy Hunt said after the data was published, a day ahead of his budget speech.
“Tomorrow at the budget, I will set out how we will go further to bear down on inflation, reduce debt and grow the economy, including by helping more people back into work.”