33. Weekly Newsletter
UK wage growth expected to keep inflation high
Catherine Mann, a member of the BoE’s monetary policy committee has stated there are concerns about inflation despite reaching targets of 2%. Wage growth has been high in the last year with wage growth in the public sector being at 6.4% between February and April this year. Wage growth has eased slightly since then but remains around double the amount compared to the BoE’s inflation target of 2%. Survey evidence suggests this will continue over the coming months and Mann has forecasted this to be a “problem for next year”.
Mann also claimed that a lot of the employees being paid the least had wage increases due to policies such as significant minimum wage increases earlier this year and that it will be the ones above them that will have a pay rise in the next year. This will lead to companies being forced to raise their prices and competitors will join them in doing so. Furthermore, Mann explained that recent market fears as a result of potential US recession will further increase inflation pressures.
Newspapers
Some of the British headlines from the past week are:
- Financial Times- ‘Landlord sales rise as financial pressures grow’
- Financial Times- ‘Barclays becomes first UK bank to scrap EU bonus cap’
- Financial Times- ‘UK to introduce bill to regulate ESG rating agencies’
- Financial Times- ‘UK post-pandemic growth higher than previously estimated, ONS says’
- Financial Times- ‘Hargreaves Lansdown agrees £5.4bn takeover’
- The Times- ‘British Steel closes in on £600m state rescue deal’
- Sunday Telegraph- ‘Farage: Starmer greatest threat to free speech in British history’
UK GDP growth higher than expected
The Office for National Statistics had previously estimated that GDP growth for 2022 was 4.3%. However, revised estimates for this week have shown that the UK economy had come out the other side of the Covid 19 pandemic in stronger health than previously thought with new estimates if a 4.8% GDP growth. Furthermore, ONS made revised estimates to 2020 and 2021 with a 0.1% increase in GDP growth in each year respectively.
One of the main reasons for the unexpected increase in estimates was the underestimates for the transport and business support industry such as HR and IT support. This has been one of a number of revisions about UK performance during the pandemic over the last couple of years. Cumulative GDP growth of 2.1% between 2020 and 2022 and several revised statistics puts the UK in “the middle of the pack” amongst the other countries that make up G7.
