British average earnings rose more than expected in the three months to August compared with a year ago, official data showed today, but remained well within the Bank of England's comfort zone for wage inflation.
The Office for National Statistics said average earnings in the three months to August rose 3.9 per cent on a year ago, the same as the prior three-month period which was revised up from 3.8 per cent.
Consensus forecasts were for a rise of 3.8 per cent so British government bonds and interest rate futures extended mild losses after the figures were released. But analysts said that the data were not likely to worry policymakers.
"The biggest surprise was the wage numbers, but there is considerable headroom between the current rate of average earnings and the Bank of England's threshold, which is probably 4.5 per cent and possibly 4.75 percent," said Mr Richard Iley, economist at BNP Paribas in London.
Mr Ross Walker at RBS Financial Markets said the data gave little guidance on when the Bank of England will raise interest rates again from the current 4.75 per cent, if at all.
"I don't think this means a great deal for interest rates for this year or in November, but it keeps alive the possibility of a rise in early 2005 and the pay settlements made in January could be key from a rate raising perspective," he said.
The ONS also said the number of Britons claiming jobless benefits in September fell just 200 compared with expectations of a drop of 5,000, leaving the rate steady at 2.7 per cent. August's originally-reported decline of 6,100 was revised down sharply to a fall of 2,100.
The ONS said the drops in the claimant count appeared to be slowing after 16 consecutive monthly falls.
Bank of England Governor Mr Mervyn King said in a speech last night that the era of continuous falling unemployment and low inflation may not last forever. "Starting as we do now with little if any spare capacity, it is unlikely that we can expect unemployment to fall indefinitely," he said.
Still, the more internationally-recognised ILO measure of the unemployment rate in Britain fell to 4.7 per cent in the three months to August, the lowest since comparable records began in 1984.