Investment Note 21st March 2018

UK wage growth gathers pace, unemployment falls


Reaching its fastest pace in nearly two and a half years, UK wage growth rose by 2.6 per cent compared to the same time last year in January, whilst unemployment has fallen to 4.3 per cent – the lowest since the mid-seventies. The improving economic data, though in line with expectations, is reinforcing expectations that the Bank of England (BoE) will press ahead with interest rate hikes throughout the year, the next being anticipated for May. Whist the news of stronger wage growth is good news, it is still not managing to outpace inflation which has tempered reaction to the release. Sterling strengthened around 0.5 per cent against the US dollar following the news, however, as prospects of a higher rate of interest historically leads to home currency becoming more attractive. The FTSE 100 index, comprised of mainly international earners, fell around 0.5 per cent as the strong currency eroded profits earned abroad, whilst UK government debt was being sold.

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