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Private regular AWE growth now expected to miss BOE forecasts by 1ppt

UK DATA
  • Looking in more detail at the private sector regular AWE numbers - which are based off of a third of the sample being asked in each cohort (so we look at the 3-months to end November which gives us a 6.5%Y/Y growth rate), we can delve deeper if we look at the single month metrics.
  • Private sector regular pay sell from 8.1%Y/Y in August to 6.0%Y/Y in November - a fall of 2.1ppt. This is a larger fall than the fall from 8.0%Y/Y in July to 6.2%Y/Y in October (a fall of 1.8ppt).
  • The September number of 7.5%Y/Y only saw a 0.8ppt fall from the 8.3%Y/Y of June. So if we see a similar fall of around 2ppt in next month's December release for that cohort, we would see the 3-month average fall to around 6.1%Y/Y in the 3-months to December (assuming we don't get any meaningful revisions). Note that the Bank of England's forecast for the 3-months ending December was 7.2%Y/Y - so we are looking at an undershoot of around a whole percentage point.
  • Looking across sectors wages have held up in "Wholesaling, retailing, hotels and restaurants" where the average wage is below that of the rest of the economy while manufacturing wages haven't fallen as fast as those seen across services or construction.
  • These data are consistent with a softening labour market seen in unofficial survey data - and if they are accompanied by soft inflation data tomorrow could see a less hawkish vote split at the February MPC meeting than the 6-3 vote that we saw in December.
  • SONIA futures have opened a few ticks higher - which makes sense following this data.
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