UK wage growth falls back again in March, according to Office for National Statistics

Average total earnings grew at an annual rate of by 2.6 per cent in the three months to March, down from the 2.8 per cent rate seen in February

Real wage growth turned negative again in the month (Getty)

UK wages continued to grow at a tepid pace in March, further diminishing the chances of an imminent interest rate hike from the Bank of England.

The Office for National Statistics reported on Tuesday that average total earnings grew year on year by 2.6 per cent in the three months to March, down from the 2.8 per cent growth seen in the three months to February.

The Bank of England has said it will be looking closely at pay growth for signs of inflationary pressure in the economy.

It decided to keep rates on hold at 0.5 per cent last week due to the slump in GDP growth in the first quarter.

Financial markets have reduced their bets on an imminent rate rise from the bank dramatically since March, pushing down the value of the pound.

Sterling was unchanged on the day in the wake of the wages data at $1.3545.

“Today’s labour market numbers add further weight to the argument that higher rates really aren’t warranted just now,” said Ben Brettell of Hargreaves Lansdown.

Inflation was 2.5 per cent in March, meaning that real wage growth turned negative again in the month, after rising by 0.2 per cent in February, which had been the first increase since March 2017.

Real wages remain around 6.5 per cent below their peak in early 2008, a period of prolonged weakness not witnessed in the UK since the early 19th century.

Slipping back

However, some analysts pointed out that, excluding bonuses, which can be volatile, nominal wage growth picked up slightly to 3 per cent in March, from 2.9 per cent in February.

By this measure, real pay growth picked up to 0.4 per cent, from 0.2 per cent in the previous month.

“Tight labour markets should push nominal wage growth higher over the medium term as inflation gradually trends towards a rate of about 2 to 2.5 per cent. Real weekly earnings growth can rise towards 1 per cent by the end of 2018,” said Kallum Pickering of Berenberg,

“If the labour market data surprise to the upside in the coming months and wage growth accelerates to well above 3 per cent year-on-year on a sustained basis in Q2, then August could come into play for the next [rate] hike.”

The ONS also said that the economy added 197,000 net new jobs in the three months to March, helping to take the overall employment rate to a new record high of 75.6 per cent.

The jobless rate was 4.2 per cent, the lowest since 1975.

Yet the ONS separately estimated that productivity slumped by 0.5 per cent in the first quarter of 2018, a grave disappointment following two strong quarters of growth in the second half of 2017.