The Bank sees this is as the most critical pointer to likely pay claims, which it fears could turn what it regards as one-off increases in oil, food and utility prices into an inflationary spiral
. The number expecting prices to rise by five per cent or more over the coming year has risen to 37 per cent from 21 per cent in February.
For more than a year it has expressed fears that a surge in pay could build one-off rises in world commodity prices into an inflationary spiral
Fears that widespread expectations of fastrising inflation could lead to an inflationary spiral
fuelled by steep pay increases were allayed yesterday by separate numbers from National Statistics and the EEF.
Official numbers from National Statistics yesterday should help to allay lingering fears at the Bank of England that a round of generous pay deals this year could turn a one-off jump in oil and other energy prices into an inflationary spiral
. NS said that in the three months to April the year-on-year rise in average earnings dipped to 4.0 per cent from a downwardly revised 4.4 per cent in the three months to March.
So far there is no sign of the pay explosion the Bank had feared might unleash a new inflationary spiral
But leaving aside this bonus factor, the growth in earnings reported by National Statistics slowed marginally to 3.6 per cent from 3.7 per cent, dispelling fears of a high-paying wage round that could lock last year's jump in oil and utility prices into a longer-running inflationary spiral
No inkling of the pay explosion many economists fear could drive Britain into a new inflationary spiral
could be discerned yesterday from the latest official numbers for average earnings.
Although this benign trend should calm the Bank of England's fears that pay claims seeking to match this year's leap in household costs could lead to an inflationary spiral
, few economists expect this in itself to deter the Bank from raising interest rates again this autumn.
Who knows what energy prices will do over the next few years but it is difficult to see them falling back, yet further raises risk kicking off an inflationary spiral
, or at the very least a series of interest rate increases.
Regular pay was only 3.8 per cent higher year on year for the third month in a row, confirming the growing view that the leap in energy prices is not being met with more generous pay deals which could develop into an inflationary spiral
This growth in earnings shows no sign of pay bargainers starting to compensate for the sharp rises in oil gas and electricity prices, which the Bank of England fears could lead to an inflationary spiral
The news will reassure the Bank of England, which has warned of the danger that pay deals compensating employees for this year's jump in oil prices could spill over into an inflationary spiral