BUSINESS LIVE: Wage growth slows; Persimmon profits slump; CMA flags vet sector concerns

Thomas Pugh, economist at RSM UK:

‘With the unemployment rate still low at 3.9% and wage growth at 5.6%, most members of the Monetary Policy Committee (MPC) will not see a reason to rush to cut interest rates at their meeting next week.

‘That said, wage growth is slowing much more quickly than the headline figure suggests and inflation will soon be back below 2%. That will set the stage for a first rate cut in the summer and for interest rates to end the year at 4.5%.

‘It is true that there are still concerns about the quality of employment data. In fact, the ONS has not yet re-validated the new data as official statistics and is warning users to be careful when using it. But there is plenty of evidence that the labor market is loosening. The number of people employed fell by 21,000 in the quarter to January and the number of salaried employees rose by just 20,000 in February.

‘More important for the inflation outlook are wage figures. Private sector wage growth excluding bonuses, the measure that most reflects underlying wage pressures, slowed from 6.2% to 6.1%. And the 3-month/3-month annualized measure, which is a better indicator of current wage pressures, was a little more than 3%, about half the overall rate.

‘Equally important for households is that real wages grew by 1.4%. That, combined with tax cuts set to be implemented in April and rising consumer confidence, should give a boost to consumer spending in the second half of this year, contributing to an economic recovery fueled by consumer spending. In fact, we expect the economy to improve materially starting in the summer.

‘Overall, although wage growth remains double the 3% – 3.5% the MPC considers consistent with 2% inflation, there are clear signs that monetary policy will soon need to become more accommodative.

“Wage growth is slowing and inflation is falling faster than expected, so it probably won’t be long before rate cuts are on the table, even if the unemployment rate remains stubbornly low. “.

AI tools do not save workers time and have become as unpopular as the commute to the office, a survey suggests.

One survey found that for 52 percent of employees who use technology, it does not save them time or add more time to their work.

The findings contradict hopes that AI will provide a big productivity boost that could help lift the economy out of the doldrums.

Britain’s competition watchdog has decided to “provisionally” launch a formal market investigation into the veterinary sector after an initial review raised multiple concerns.

The Competition and Markets Authority’s concerns include weak competition, a lack of information for consumers to choose the best veterinary practice and that pet owners may overpay for medicines.

Persimmon expects market conditions to remain subdued throughout this year, with the short-term outlook “uncertain”, after the housebuilder reported a profit drop of around 52 per cent.

The FTSE 250 company’s pre-tax profit amounted to £351.8m for the 12 months to December 31, missing market expectations of £359.5m.

Group chief executive Dean Finch said:

‘The Group successfully navigated difficult market conditions in 2023. Completions exceeded expectations, margins were industry-leading, we maintained our strong balance sheet and continued to deliver further improvements in the quality of our products and services.

‘While the near-term outlook remains uncertain, significant pent-up demand for housing remains unchanged. Customers want quality homes in the places they want to live and work, and affordability is crucial.

‘During the year we have continued to take additional steps to strengthen the business and we are well positioned to meet this demand through our three excellent brands offering different price ranges with overall private average selling prices that are below the market average.

“The investments and operational changes we have made over recent years mean our customers trust us to consistently deliver high-quality homes.”

Japan could be on the verge of raising interest rates to move out of negative territory after revised figures showed the country narrowly avoided recession.

The economy grew 0.1 percent in the fourth quarter, compared with an initial reading of a 0.1 percent decline.

That could give the Bank of Japan room to raise interest rates for the first time since 2007 when it holds its policy meeting next week.

UK wages before bonuses slowed to a slightly weaker-than-expected 6.1 percent in the three months to January 31 as the unemployment rate rose more than expected to 3.9 percent , new data from the Office for National Statistics shows.