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Wage growth dips ‘ending hope of August rate rise’

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Average wage growth for UK employees dipped unexpectedly in the three months to April, according to figures from the Office for National Statistics (ONS).

Pay grew by 2.8% excluding bonuses, having reached 2.9% in the previous month’s data, and by 2.5% including bonuses, down from 2.6%.

Both numbers were lower than economists had expected but are above the level of inflation of 2.4%.

Figures due tomorrow are expected to show inflation ticking up slightly to 2.5%.

Ben Brettell, senior economist at Hargreaves Lansdown, said: “The Bank views wage growth as a key indicator when considering whether to raise rates. Disappointing figures here, combined with confirmation that the economy grew by just 0.1% in Q1, should put paid to any talk of a summer rate rise.”

Ed Monk, associate director for personal investing at Fidelity International, added that households “can’t catch a break” as they were getting richer for a while but now it looks like that won’t last.

He said: “If tomorrow’s data does show inflation has jumped back up, the Bank of England will be left scratching its head on a rate hike in August.  The Old Lady of Threadneedle Street will have to balance recent mixed data on the economy with its long-held concern that inflation is about to return with a vengeance.

“Real wage growth stagnating or tailing off, as well as fears of the UK economy moving back into the slow lane due to ongoing concerns over Brexit, could put back a rate rise even further. Given that, there’s every chance that ‘lower for longer’ could remain the status quo for some time.”

Fall in unemployment

The UK labour market statistics revealed that in the three months to April 2018, the number of people in work increased and the number of unemployed decreased.

Between February and April, the employment rate was 75.6%, higher than for a year earlier (74.8%) and the joint highest since comparable records began in 1971.

There were 32.39 million people in work, 146,000 more than for November to January, and 440,000 more than for a year earlier.

Unemployment over the three months came in at 4.2%, down on the 4.6% a year earlier, but it is still the joint lowest figure since 1975.

In total, there were 1.42 million unemployed people, which is 38,000 fewer than for the three months to January 2018 and 115,000 fewer than recorded last year. 

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