PAY GROWTH WILL FORCE RATES HIGHER

Wages To Push Rates Up Even If Inflation Falls Today

JACK

UK WAGES grew at their fastest pace since records began in 2001, new figures out yesterday revealed, raising the prospect of a further rate hike from the Bank of England next month.

Wage growth, excluding bonuses, topped 7.8 per cent in April to June, the Office for National Statistics reported. Once inflation is taken into account, however, real wages were down by 0.6 per cent.

But the rapid increase in wage growth will likely cause concern for the Bank of England, which has previously warned about the inflationary impact of wage increases.

Earlier this month, the Bank hiked interest rates for the 14th time in a row to 5.25 per cent, as Bank governor Andrew Bailey (right) and co work to bring inflation down –it currently sits at 7.9 per cent.

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Experts said the rise in wage growth will likely lead to another rate hike when the Bank’s Monetary Policy Committee next meet on 21 September.

“With wage growth still accelerating, this supports our view that the Bank of England will deliver one more 25 basis point rate hike before it brings its tightening cycle to a close,” Ruth Gregory, deputy chief UK economist at Capital Economics, said.

The governor received criticism last year for telling employees not to lobby for pay rises, and his deputy Huw Pill, the Bank’s chief economist, was also slammed for saying Brits had to accept they would be poorer.

However, a wage price spiral –in which salaries are forced to keep pace with higher costs, itself resulting in cost increases –appears to have now bedded in to the UK economy.

Fresh inflation data out today is expected to show that the rate of price rises is falling, dropping to around 6.7 per cent for July, according to consensus among economists.

Grocery price inflation saw its second sharpest fall since 2008 yesterday, according to research firm Kantar, falling 2.2 percentage points to 12.7 per cent for the four weeks to 6 August.

While the inflation print will likely be lower today, all eyes will be on core inflation, which removes volatile food and energy price movements. It currently sits at 6.9 per cent.

However, a fall in inflation might not be enough to persuade the Bank to press pause on its rate hike campaign.

“Even if inflation falls as expected… the inflationary pressure of still rising wage growth means the Bank is unlikely to put a halt on further rate rises just yet,” Richard Carter, head of fixed interest research at Quilter Cheviot, said.

NOT JUST A TRADING UPDATE M&S raises full-year profit outlook

LAURA MCGUIRE

SHARES in Marks & Spencer closed up over eight per cent yesterday after the supermarket raised its profit outlook for the year.

The retailer reported an 11 per cent increase in sales in its food business in the first 19 weeks of the year, while sales jumped six per cent in its clothing and homeware division.

While the firm warned that there are “considerable uncertainties” on the economic outlook and a risk that consumer spending will “tighten” going forward, it still expects profit to grow more than last year.

“We now expect the outcome for the year to show profit growth on 2022-23, and the interim results to show a significant improvement against previous expectations,” M&S said. It comes after M&S reported a successful year in May, with the group posting annual revenues of £11.93bn, up 9.6 per cent on the year before.