Wage growth unexpectedly slipped to 2.8% from 2.9% in the three months to April, despite unemployment falling by 38,000 to 1.42 million, official figures show.
Economists had expected wage growth to remain steady at 2.9%. The slowdown is likely to dampen expectations of an interest rate rise in August. Wage growth is one of the key figures the Bank of England monitors to assess the health of the UK economy.
Although it is above the current level of inflation of 2.4%, it remains well below inflation’s five-year high of 3.1% seen in November.
This consumer spending squeeze is one of the reasons many shops are currently struggling. Economists said the latest figures reduce the chances of a near-term increase in interest rates.
HSBC’s UK economist, Elizabeth Martins, said: “The market is pricing in just a 4% chance of a rate rise at the Bank of England’s 21 June meeting, so any change to policy would be a big surprise… at this point, the market sees around a 50% chance of an August hike.”