MNI: BOE Survey Showing Surging Pay Unlikely To Sway Doves

A Bank of England survey indicating an upcoming surge in wages which was highlighted by the four Monetary Policy Committee voters opting for a 50-basis-point interest rate hike in February may not necessarily sway other members, who will note that the figures were out of kilter with other comparable data.

While the Bank agents’ pay survey found firms expected average pay settlements to rise to 4.8% in 2022, other surveys have found pay expectations centring on 3%, albeit with wide variations between companies and sectors. In the past, when wages were rising only moderately, the BOE survey has proven accurate, but there are questions over whether it is less reliable at times like the present, when pay takes off at some firms but others struggle to afford increases.

The BOE survey differs from the others in that its agents rely on face-to-face contacts with company executives, rather than on sending out questionnaires. But if companies able to take time to talk to agents are more successful, and more able to afford higher pay, this could skew the data.

Other surveys, like those provided by personnel body the CIPD, Lloyds Bank, and XpertHR show much lower rates of growth in anticipated remuneration.

"NOT EVEN UPPER QUARTILE AT 5%"

XpertHR is set to release its 2022 pay expectations survey later this month, but while this will indicate mounting pressures, it will not generate figures nearly as high as the BOE agents’.

“I can't even get my upper quartile to 5%. That is quite telling. There is a huge difference in the numbers," said Sheila Attwood, managing editor at XpertHR, which has already published data showing the median pay award for the three months to end-January at 3%.

While some MPC members have raised concerns over the impact of elevated inflation expectations on pay, Attwood said that many factors are at play in a tight labour market.

"It is inflation, it is labour turnover, it is skill shortage and linked to that is what everyone else is doing … If everyone is giving high pay awards, others will follow suit," she said, adding that some firms were also basing 2022 pay settlements on budgets agreed in 2021, and so were unlikely to deliver large increases until next year.

The five MPC members who voted for a 25-basis point hike in February and are inclined to a more gradualist approach to tightening are likely take to careful note of the disparity between the different wage surveys.

The BOE agents’ findings were “a big jump from where we were coming from and different from some of the other surveys … It is a question whether those expectations will materialise," said one of the five, Silvana Tenreyro, in response to an MNI question following her speech at the Geological Society last Wednesday.