UK average weekly earnings continued to outpace inflation in the three months leading up to January, potentially influencing the Bank of England’s upcoming interest rate decision. This persistent wage growth adds another layer of complexity to the UK’s current economic landscape.
According to the Office for National Statistics (ONS), average weekly earnings in the UK saw a 5.9% year-on-year increase in the three months to January. This figure matches the growth rate from the previous three months and remains significantly higher than the January inflation rate of 3%.
Liz McKeown, ONS director of economic statistics, noted the sustained strength of overall pay growth across both public and private sectors, although the latter experienced a slight slowdown in the most recent period. The unemployment rate held steady at 4.4%, unchanged from the preceding three months. Payroll employment figures showed a modest increase of 9,000 individuals between December and January, following a decline the previous two months. Year-on-year, payroll employment grew by 72,000.
Early estimates from the ONS indicate approximately 816,000 job vacancies between December and February, a figure largely consistent with the previous three months. This data precedes the Bank of England’s interest rate decision, expected later on Thursday. Most analysts anticipate the central bank will maintain the current rate of 4.5% given the uncertainties surrounding the impact of US trade policies and mixed signals from the UK economy.
Beyond persistent inflation and slowing economic growth, businesses face mounting pressure from upcoming increases in the national minimum wage and national insurance contributions, effective April 1st and 6th, respectively. These factors complicate the economic outlook for Chancellor Rachel Reeves as the spring statement approaches on March 26th. The Bank of England must carefully consider these pressures as it navigates its monetary policy. The continued strength in wage growth might signal further inflationary pressures, potentially requiring future rate adjustments.
In conclusion, the sustained wage growth, coupled with other economic indicators, presents a complex challenge for the Bank of England. The upcoming interest rate decision will be crucial in navigating the UK’s economic path forward, balancing inflation control with supporting economic growth. The interplay between wage growth, inflation, and interest rates will continue to be a key focal point for investors and policymakers alike.
