The annual growth of regular pay has outpaced inflation for the first time in almost two years, according to official estimates published on Tuesday.
The Office for National Statistics (ONS) said the average weekly wages during June to August has grown by 1.1 percent in real terms compared to the same period last year.
Monthly figures show real wages began to grow in June, by 0.6 percent on last year. It was the first time real regular pay has shown annual growth since Sept. 2021.
In July and August, average regular wages grew by 1.3 percent in both months compared to the same months in 2022 when adjusted for inflation using Consumer Prices Index including owner occupiers’ housing costs (CPIH).
The total pay growth, which includes bonuses, grew by 1.3 percent on last year between June and August in real terms, the ONS said.
It comes after CPIH inflation slowed to 7.7 percent in the second quarter this year, down from a peak of 9.4 percent in Q4 last year.
“To keep this progress up, we have to stick to our plan to halve inflation this year, which the Bank of England and others say we’re on track for,” he added.
Nominal Pay Growth Slows Slightly
While not adjusted for inflation, the annual growth of total pay has edged down slightly, which is likely to give the Bank of England (BoE) some confidence for keeping the base interest rate at where it is next month.Between June and August, the average regular weekly pay grew by 7.8 percent compared to the same period in 2022, down from a peak of 7.9 percent in the last three-month period (May–July).
The public sector saw a 6.8 percent growth, which is the highest regular annual growth rate since comparable records began in 2001, the ONS said.
The private sector regular pay grew by 8 percent. It’s also among the fastest annual growths outside of the COVID-skewed period.
Taking bonuses into account, the annual nominal pay growth was 8.1 percent between June and August. It’s down from 8.5 percent in the last three-month period and the fifth highest annual growth on record.
The growth rate was affected by the NHS and civil service one-off payments made in June, July, and August, the ONS said.
The showing down of wage growth may help to tip the scale towards not resuming interest rates hike.
The BoE’s Monetary Policy Committee (MPC), which is tasked with keeping inflation at around 2 percent using tools such as interest rate-setting, have raised rates 14 consecutive times, from 0.1 percent to 5.25 percent. It halted the hikes in September, keeping the rate at 5.25 percent.
Samuel Tombs, economist at Pantheon Macroeconomics, said the new ONS figures should tip the scale towards maintaining the rate again.
“Signs that wage growth is losing momentum should persuade the MPC to keep Bank Rate at 5.25 [percent] again next month,” he said in a statement.