6 June 2023 - Wage negotiations turning core inflation into a persistent issue
Services and composite output data for May were released, and both remained around the same level that was seen in April. The Services PMI showed that the sector is still well into an expansive phase at 55.2 which pushed the composite number for services and manufacturing combined to 54, from 53.9 previously. As part of the data, services firms noted strong input costs from wages which have been growing for the past three months. This will continue to add pressure to core inflation and will likely lead the Bank of England to continue to hike interest rates. The nature of wage increases is that once workers, or their representatives, claim a wage increase, based upon headline inflation at the time that negotiations begin, there is a lag before that increase is paid. In the meantime, as is the case currently, headline inflation has begun to fall making the pay award appear to be more generous. Beyond Currency Market Commentary: Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.