(Multibagger) - British Companies Anticipate Smallest Increase in Selling Prices in 3 Years While Wage Growth Remains Steady
A recent survey from the BoE's Decision Maker Panel revealed that British businesses are expecting a modest 3.6% increase in selling prices over the next year, the lowest forecast since September 2021. This is down from the previous reading of 3.7%. However, wage growth expectations have remained steady at 4.1% during the three months to August, unchanged from the previous survey.
Despite a period of declining wage growth expectations over the past 18 months, the latest data suggests that this trend has stalled. High wage growth remains a key concern for the hawks on the MPC, as they fear it could lead to long-term inflation pressures.
The survey also indicated a decrease in uncertainty among companies following Prime Minister Keir Starmer's election victory, reaching its lowest level since before the COVID-19 pandemic.
Investors are currently pricing in a 25% chance of a rate cut by the BoE at its upcoming policy announcement in September, with a full rate cut expected in November. BoE Governor Andrew Bailey has expressed cautious optimism about easing inflation pressures but emphasized the need for patience before considering further rate cuts.
Analysis:
- British companies are expecting a slight increase in selling prices over the next year, while wage growth remains stable at 4.1%.
- Concerns about high wage growth persist among policymakers, as it could lead to long-term inflation pressures.
- Uncertainty among businesses has decreased following the recent election, signaling improved confidence in the economy.
- Investors are pricing in a possibility of a rate cut by the BoE in September, with a full cut expected in November.
- BoE Governor Andrew Bailey is cautiously optimistic about easing inflation pressures but advises against rushing further rate cuts.