UK wage growth accelerated at the fastest pace in more than two years during the three months to January, suggesting an end to pay squeeze, and extended support to expectations of a rate hike from the Bank of England.
Average earnings excluding bonuses grew 2.6 percent year-on-year in the three months to January, which was the fastest pace since November 2016, when regular pay rose 2.7 percent, data from the Office for National Statistics showed Wednesday. Economists had expected 2.6 percent.
Including bonuses, average earnings increased 2.8 percent year-on-year in the three months to January, which was higher than the 2.7 percent in the October to December period.
Accelerating wage growth adds strength to the hawkish stance in the Bank of England’s Monetary Policy Committee that is set to announce its latest interest rate decision on Thursday.
The jobless rate in the three months to January was the joint lowest since 1975 and the employment rate rose to a record high.
The ILO unemployment rate eased to 4.3 percent from 4.4 percent in the three months to December. Economists had expected it to remain unchanged at 4.4 percent. The rate was 4.3 percent in the August to October 2017 period.
However, the number of people without work was 1.45 million, up 24,000 persons from August to October.
The employment rate was 75.3 percent in the November to January period, the joint highest since comparable records began in 1971. A year ago, the rate was 74.6 percent. In the September to November 2017 period, the rate was 75.3 percent.
There were 32.25 million employed in the three months to January, up by 168,000 from the previous three months ended October and 402,000 more than from a year earlier.
“Overall, with the squeeze on consumers’ finances coming to an end, today’s latest labor market figures provide us with reassurance that the economy will remain resilient and adds further weight to our view that the MPC will push ahead and raise rates again in May,” Capital Economics economist Ruth Gregory said.
Separate data from the ONS showed that government borrowing remained on track to be within the Office for Budget Responsibility’s forecast for this year.
The public sector net borrowing ex-banks rose by GBP 2.5 billion to GBP1.3 billion from a year ago, when there was a surplus of GBP 1.2 billion. Economists had predicted GBP 1.8 billion borrowing for February.
Net borrowing for the April 2017 to February 2018 period decreased by GBP 2.5 billion to GBP 41.4 billion, which was the lowest year-to-date figure figure since February 2008.
Earlier this month, the Office for Budget Responsibility revised down the current financial year’s deficit prediction to GBP 45.2 billion from GBP 49.9 billion predicted in November.
Public sector net debt excluding both public sector banks and Bank of England was GBP 1,570.6 billion at the end of February 2018, which is equivalent to 75.8 percent of GDP.
“We’ve reached a turning point in our economy, with debt forecast to start falling sustainably for the first time in 17 years,” the HM Treasury said in a Twitter post.