UK wage growth still outpacing inflation

The new release from the Office for National Statistics showed growth for both the public and private sector. Nominal wages rose from 5.6% to 5.9% during the same period.

ONS director of economic statistics Liz McKeown said “growth in pay, excluding bonuses, rose for a third consecutive time, with increases seen in both the private and public sector. After taking account of inflation, real pay growth also increased slightly.

Separate figures released yesterday by the Chartered Institute of Personnel and Development (CIPD) showed that redundancy intentions were at their highest level in 10 years as firms planned job cuts ahead of Labour market policy changes announced in last year’s budget.

The UK’s unemployment rate remained at 4.4%. However, the ONS advised caution in reading these figures due to low response rates for its employment survey.

Some economists are hopeful that wage growth could lead to a rise in consumer spending in the latter half of the year. There is little sign yet that improved earnings are shifting high savings rates or low levels of consumer confidence.

Commenting on the figures, Deutsche Bank’s chief UK economist Sanjay Raja said: “Some tempering of wage growth is likely over the coming quarters – despite the astonishingly strong rates recorded in the official AWE (average weekly earnings) data. The Bank’s Agents point to private sector pay settlements tracking around 3.7% this year. Other pay surveys suggest some downside. And we expect pay growth to slow further as we get past the April bump in National Living Wage increase.”

The 2.5% increase was using the CPIH inflation index, which includes owner occupiers’ housing costs and is the preferred measure of the ONS. Using the alternative CPI rate, wages increased by 3.4%.