UK Shock Wage Surge Puts to Rest Talk of BOE Pause
Comment of the Day

August 15 2023

Commentary by Eoin Treacy

UK Shock Wage Surge Puts to Rest Talk of BOE Pause

This article from Bloomberg may be of interest. Here is a section:  

Whole-economy regular wage growth accelerated to 7.8% in the three months to June, from 7.5% previously. That was well above our estimate for 7.5% and consensus expectations for 7.4%. The surprise, relative to our forecasts, was almost fully accounted for by revisions to the data rather than news about the monthly pace of growth in June.

Whole-economy wage gains including bonuses ticked up faster, to 8.2% in June from 7.2% previously, largely due to one-off payments made to National Health Service workers on that month.

More important for the BOE is regular pay growth in the private sector, which climbed to 8.2% in the three months to June, from 7.9% in May. We expected it to rise to 7.8%, while the BOE was projecting it to come in at 7.6% in its August forecast. One thing to note is that the reading is still affected by April’s near-10% rise in the national minimum wage.

Eoin Treacy's view

UK CPI will be updated tomorrow. The ex-food, alcohol and tobacco measure was still close to the peak level of around 7% at the last update in late June. With wage growth picking up, the Bank of England will be hoping inflationary pressures don’t reaccelerate and contribute to a dreaded wage-price spiral.

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