Earnings slowdown eases rate fears

Fears of a pre-election rise in interest rates receded yesterday as figures for the key wage bargaining month of January showed that earnings growth had fallen.

Fears of a pre-election rise in interest rates receded yesterday as figures for the key wage bargaining month of January showed that earnings growth had fallen.

Official figures showed the labour market continued to tighten in the new year, but analysts said there was nothing new to prompt the Bank of England to raise rates next month.

The data, from the Office for National Statistics, showed that the fall in the number of manufacturing workers since Labour won power in May 1997 fell just 1,000 short of the politically significant 1 million mark.

The headline rate of growth in average earnings - wages, salaries and bonuses - slowed to 4.2 per cent in January, a five-month low, from 4.3 per cent in December. Excluding bonuses, the fall in earnings was steeper, easing from 4.5 to 4.2 per cent.

The number of people in work rose to an all-time high of 28.57 million in January, up 127,000 on the previous quarter. But the number working in manufacturing fell by 14,000 to 3.517 million,999,000 down on the 4.516 million in the spring of 1997.

Analysts said it was difficult to find a single message for monetary policy out of the morass of different figures, but the data did not flash up new inflationary warning signals.

Malcolm Barr, at JP Morgan Chase, said: "There is no sign that wage inflation is accelerating in the January data, which gives the Monetary Policy Committee time to 'wait and see' before raising rates."