LONDON - British workers' earnings grew at the slowest rate on record in the three months to May, one gauge showed, even as unemployment fell further, giving the Bank of England pause for thought as it prepares to start raising interest rates.
Official data released on Wednesday showed earnings excluding bonuses rose by an annual 0.7 per cent in the three months through May.
That was less than half the rate of inflation and the slowest growth in regular pay since records began in 2001, taking some of the shine off the economic recovery which Britain's ruling Conservative Party is hoping will help deliver success in next year's national elections.
British government bond prices briefly rose and sterling fell on the weak earnings numbers, which could ease pressure on the BoE to raise interest rates later this year. "With few signs that the labour market is a source of inflationary pressure, there remains no pressing need for the Monetary Policy Committee to raise interest rates this year,"said Samuel Tombs, an economist at consultancy Capital Economics.
Britain's economy has been recovering fast for more than a year, raising questions about the need for continued stimulus.
The Office for National Statistics said on Wednesday that the jobless rate fell to 6.5 per cent from March to May from 6.6 per cent a month earlier, down sharply from 7.8 per cent in the same period last year.
The unemployment rate, which matched economists' forecasts in a Reuters poll, was the lowest since the October-December period of 2008 - when the global financial crisis was snowballing.
But the weak earnings figures underscored the BoE's view that the recovery can continue without risking a big pickup in price pressures.
In the three months through May, total pay including bonuses rose a yearly 0.3 per cent, the weakest growth in five years.
That was below a forecast of 0.5 per cent in the Reuters poll and down from a yearly rise of 0.8 per cent in the three months to April.
The Bank is forecasting 2.5 per cent wage growth this year, up from 1.25 per cent for 2013 as a whole but still well below a pre-crisis average of 4.5 per cent.