In a positive development for households, UK regular pay is growing faster than inflation for the first time in almost two years this summer, providing some respite in the ongoing cost of living
squeeze.
According to the latest data from the Office for National Statistics, real regular pay, adjusted for inflation, increased by 0.7% year-on-year in the June-August quarter.
During the same quarter, regular pay increased by 7.8%, maintaining its growth rate from the previous month. However, real pay has turned positive due to the decline in inflation last summer.
Moreover, real regular pay growth during the preceding period, May-July, was revised upwards to 0.1% from an initial reading of 0%, marking the first positive reading since October 2021.
Total pay, which includes bonuses, rose by 8.1% in June to August 2023, primarily due to increased payments to NHS and civil service staff this summer. It is worth noting that this figure is slightly lower than the 8.5% recorded in May-July.
The increase in wages is undoubtedly a welcome development for struggling households, following a two-year period of rising living costs. However, this situation might prompt the Bank of England to maintain high-interest rates. Chief economist at the Bank of England, Huw Pill, highlighted wage increases as an 'outlier' that could signify enduring inflationary pressures.
In its latest assessment of the UK jobs market, the ONS also noted that public sector pay growth reached its highest level in over 20 years. Nonetheless, it still lags behind private sector pay growth.
Here are the key details:
-Annual average regular pay growth for the public sector stood at 6.8% in June to August 2023, marking the highest regular annual growth rate since comparable records began in 2001. In contrast, the private sector saw 8.0% growth, one of the largest annual growth rates recorded outside of the coronavirus (COVID-19) pandemic period.
-The finance and business services sector experienced the most substantial annual regular growth rate at 9.6%, followed by the manufacturing sector at 8.0%. This is one of the highest annual regular growth rates for the manufacturing sector since comparable records began in 2001. Photo by Whittle100, Wikimedia commons.