The latest economic indications suggest a mitigation of the strain on living costs, as wage growth outpaced inflation for the first time in nearly two years. Official data reveals a 7.8% increase in wages in the period from June to August, outstripping the average inflation rate during the same interval.
The last instance of wage growth usurping inflation came about in October 2021, during the tempest of the Covid pandemic. However, this wage increase represents an average, indicating that financial burdens may not have been lifted for all.
Sectors such as finance, business services, and manufacturing witnessed the most significant upticks in annual wage growth. However, a stark discrepancy between public and private sector remuneration remains. The Office for National Statistics (ONS) reports a noteworthy 6.8% wage growth for public sector workers from June to August – the highest since records began in 2001. Meanwhile, their private sector counterparts saw an average pay rise of 8%.
Inflation has been showing signs of deceleration; nevertheless, the annual rate until August stood at a hefty 6.7%, more than triple the Bank of England’s 2% target. New inflation figures to be released on Wednesday are likely to indicate a continued slowdown of price rises.
The Bank of England has utilised interest rate hikes as a countermeasure for inflation. The borrowing costs remained stagnant at 5.25% last month, and Capital Economics believes that interest rates may have peaked for the time being, spurred by Tuesday’s wage growth figures. Ashley Webb, a UK economist at the research firm, concurred with this view.
The number of job vacancies in the UK, on the contrary, is on a downward spiral, with a drop of 43,000 reported between July and September. The worst affected were real estate companies, experiencing a decline of nearly 30% in job availability compared to the previous quarter. However, it’s worth noting that despite the overall dip, the total number of vacancies still surpass the figures registered in the pre-Covid months from January to March 2020 by 187,000.
