Markets Tumble 1.6% on Average Wage Inflation 8.2%
Published / Last Updated on 15/08/2023
UK average wages surged upwards with pay rises of 8.2% pa (excluding bonuses) for the year to June 2023 according to figures released by the Office for National Statistics (ONS) today.
This is the highest increase rate in weekly wage inflation since 1998 i.e., 25 years
With June consumer prices index (CPI) inflation at 7.9% pa and expected to fall tomorrow to below 7% pa, this now means that pay is increasing faster that prices. This has many repercussions:
- Higher wages keeps upward pressure on inflation as we all have more to spend.
- Many unions are still taking industrial action to get payrises for their members in excess of the inflation rate.
- Pensioners should get a welcome boost to state pension increases when inflation figures are published for September as the triple lock of the higher of CPI, Wage Inflation and 2.5% increases will increase state pensions in April 2024. Some are forecasting a triple lock at over 8.2% pa.
- The Bank of England is already under pressure to increase interest rates even further.
- Increased interest rates will hurt mortgage borrowers and the property market.
- Increased interest rates will benefit savers.
- Increased interest rates will likely push the UK into recession.
With all of the above, stock markets are taking a hit today with FTSE 100 falling 1.6%. Investors are nervous and with the risk of recession, this is pushing stock markets down as investors look to safe havens including bank and building society interest rates looking increasingly attractive with some banks already offering 7% pa to savers.