Expert from Markit Chris Williamson comments on the UK household pay survey data
“Weak wage expectations raise doubts over the extent to which pay growth might revive in 2015, which in turn puts question marks over the sustainability of the economic upturn.
“Survey data collected from just under 2,000 employees by IPSOS Mori on behalf of Markit in March and April found that only one-in-five employees expect their pay to rise by 2% or more in 2015. Just under one-in ten anticipate a pay rise in excess of 3%.
“Just over one-in-three (36%) of all employees expect their pay to be frozen this year, while 7% expect to suffer a pay cut.
“The survey responses collectively point to employee pay rising by just 1.0% this year on average. An average expectation of a 0.8% pay rise in the public sector compares with 1.3% in the private sector.
“The survey data suggest that growth of employee earnings is likely to remain weak in coming months, confounding widespread expectations of pay growth accelerating this year. The most recent official data showed headline pay growth slowing to 1.7% in the three months to February.
“Although there is recruitment survey evidence that skill shortages are driving up salaries offered to new recruits as companies compete for talent, the recent drop in inflation to zero appears to be feeding through to lower annual pay reviews for existing employees, holding down overall pay growth.
“The Bank of England is currently forecasting the economy to grow by 2.9% this year, fuelled by consumer spending rising on the back of higher real employee earnings. The worry is therefore that weak pay growth means the economy is reliant on ultra-low inflation to boost consumer spending power. With inflation likely to pick up later this year, economic growth could consequently slow more than policymakers are expecting.”
