Unlocking the Future: Key UK Wage Data and September BoE Rate Hike Prospects

Key UK wage data to help lock-in September BoE rate hike

There’s mounting evidence from surveys that price pressures in the UK are easing, the jobs market is cooling, and growth is slowing. But the Bank of England has made it abundantly clear that it’s waiting for the actual data to show those trends too, and next week we’ll get crucial wage and jobs data.

Private sector wage growth currently stands at 8.2% and is likely to stay there when we get fresh data next week. But there’s an outside risk that we see this nudge slightly lower on the basis that separate data from firms' payrolls indicated that median pay actually fell in level terms during August. This data is released a month ahead of the more traditional average weekly earnings numbers. We’d expect that to be coupled with a further modest rise in the unemployment rate, as well as a renewed fall in vacancies. The ratio of unfilled job openings to unemployed workers is coming down quickly and closing in on pre-Covid levels.

All of that seems sufficient for the BoE to hike again in September, especially if services inflation nudges higher in data due the day before the rate announcement. But we remain comfortable with our call for a November pause and that September’s hike is likely to be the last.

Separately, we’ll get growth data for July, and we expect a modest contraction in economic output. June saw surprisingly strong growth, including a huge increase in manufacturing production. That surge, which was highly unusual (outside of the Covid period), seems like an anomaly and we expect some retracement in July.