This week, it was announced that UK wages grew 7.8% in the three months to July, the highest rate on record, despite a slowing jobs market which saw a rise in unemployment and slower hiring. With vacancies now below 1 million, the ratio of unemployed people to vacant jobs has almost returned to pre-pandemic levels.
Despite the highest growth in wages on record, the UK economy contracted by 0.5% during July, as spending and activity were impacted by wet weather and industrial action across various industries. Economists had expected a drop of 0.2%. Regardless, traders are still expecting another 0.25% interest rate rise from the Bank of England (BoE) next week as inflation is still above target, but with most now anticipating this will be the final increase.
Elsewhere, the European Central Bank raised interest rates a further 0.25%, to their highest ever level at 4%. The ECB signalled it could be nearing the end of its rate rises, and economists think that most major central banks are in this position too as inflation has started to fall and economic growth is at risk from higher borrowing costs. As well as the BoE meeting next week, the US Federal Reserve will also be meeting, but analysts expect rates to be kept on hold.
Andrea Wood, BSc (Hons) / Chartered MCSI – Investment Manager