U.K. wage growth grew less than expected in the three months to July, while early data for August pointed to the start of a post-Brexit-vote labor market weakening.
The Office for National Statistics said average weekly earnings, excluding bonuses, rose by 2.1%, down from 2.3% in the three months to June and below expectations for 2.2% wage growth.
The figures coincided with news that the U.K. unemployment rate held at 4.9% in the three months to July, as expected, and the number of employed rose by 174,000 from the previous three months. That was faster than the 172,000 quarter-on-quarter growth in the three months to June and above the 171,000 growth expected.
However, those figures captured a period that largely fell before the U.K. voted on June 23 to leave the EU, and early ONS data for August showed that number of people claiming out of work benefits had risen 2,400 in August from July, having fallen in the previous two months. Capital Economics U.K. economist Ruth Gregory said she expects the labor market to weaken in the months ahead.
Today's data comes a day before the Bank of England meets to set rates. Governor Mark Carney has in recent weeks had to defend himself against suggestions the central bank acted too hastily on Aug. 4 in slashing the benchmark rate by quarter of a point to 0.25% and pumping up bond buying in bid to contain the fallout from the Brexit vote.
Capital Economics' Gregory said that "today's figures add further support to the consensus view that the Monetary Policy Committee will stand pat at tomorrow's meeting. But given the signs that GDP growth has ground to a halt in the third quarter, a further loosening in monetary policy is probably still on the cards later this year. Our expectation is that bank rate will be cut to 0.10% in November."
The benign wage growth data follow a report on Tuesday that August inflation unexpectedly held steady at 0.6%, instead of rising to 0.7%. That was despite a 7.6% surge in producers' input costs, which are seen likely to feed through into headline inflation later this year. Producers face sharply rising costs after a near-11% decline in the value of the pound against the dollar following the June 23 Brexit vote.
The pound was recently up 0.02% against the dollar at $1.3195. The U.K. 10-year government bond yield was up 1 basis points at 0.92% and the FTSE 100 was up 0.13% at 4,392.87.