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UK wage growth slows to weakest pace in six months

Average total pay in the three months to May was up 2.5 per cent on a year earlier, the slowest increase since November 2017

Ben Chu
Economics Editor
Tuesday 17 July 2018 10:44 BST
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The Bank of England has been optimistic about pay growth rising to 3 per cent
The Bank of England has been optimistic about pay growth rising to 3 per cent

Annual UK wage growth slowed in May to its weakest pace in six months, official data on Tuesday showed.

The Office for National Statistics (ONS) reported that average total pay in the three months to May was up 2.5 per cent on a year earlier, down from the 2.6 per cent rate in April and the slowest since November 2017.

Excluding bonuses, the measure closely watched by the Bank of England, pay was up 2.7 per cent, down from the 2.8 per cent expansion rate in April and the weakest since January.

The Bank of England has been optimistic about pay growth rising to above 3 per cent, citing survey evidence, and has indicated that it could raise interest rates as early as August to head off inflationary pressure.

However, one member of the bank’s nine member rate-setting Monetary Policy Committee, Sir Jon Cunliffe, expressed doubts about the momentum in wage growth last week and cited various “false dawns” over the past five years.

The disappointing wage data came despite the economy adding an extra 137,000 net jobs over the quarter and the employment rate hitting a new record high of 75.7 per cent.

The unemployment rate was steady at 4.2 per cent, the lowest since 1975.

“Low unemployment is yet to generate serious wage pressures and Brexit uncertainties continue to reign. The case for raising interest rates in August may have strengthened, but is hardly compelling,” said Ian Stewart of Deloitte.

Slipping back

Public sector pay growth slipped to 2.1 per cent in May, down from 2.4 per cent previously.

Factoring in consumer price inflation of 2.4 per cent in May means that in real terms average wages for this group fell again.

“Wage growth has slowed again. Boosting pay packets should be a priority for the government, but ministers are failing to act,” said Frances O’Grady of the TUC.

“We need to get the economy moving again. The government should put the minimum wage up to £10 and give all public servants a proper pay rise.”

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