Surveys hint at wage growth still missing in official estimates

Peter Spence
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Sources disagree over the strength of UK earnings growth (Source: Getty)

There were some signs of wage growth this June, according to a survey produced by Markit. Companies in the service sector are now reporting that higher wages are pushing up operating costs.

Many panellists attributed another rise in operating costs during June to "higher average salaries and wage costs".

This earnings growth has been evident in private surveys for a while now, but it's not appearing in the Office for National Statistics' (ONS) official estimates.

That's led to a debate over how strongly wages really are growing. Markit's chief economist said in June that "we're still scratching our heads as to why that official data has been so weak".

Today's survey release also shows the UK hasn't managed to put in the week's third data beat. Services sector growth has missed analyst estimates in June. Markit's purchasing managers' index (PMI) for the sector has been revised down from a flash estimate of 58.6 to 57.7.

Any number above 50 implies that the sector is expanding, and numbers this high imply strong activity in services. Economists had been expecting a downward revision, but not one quite so steep. A poll of analyst estimates delivering a consensus forecast for today's data of 58.3.

The data follows two PMI beats for the UK this week. Both manufacturing and construction surveys came in stronger than economists had expected. Sadly, no hat-trick. In a preview of today's release, Morgan Stanley said that 58.3 would still be a "high by historical standards and consistent with strong growth".

HSBC analysts had pencilled in a slightly lower reading of 58.4 for June, prompted by concerns over some softening in future activity and new orders components of Markit's initial estimates for the month. New orders fell to a 12-month low in May, although they remained "at an elevated level by historical standards", according to Morgan Stanley.

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