UK Inflation Surge Outpaces Wage Growth

Wages have been growing at a decent pace in the UK, but inflation has been growing even faster, outpacing the wage growth

US CPI inflation is expected to tick lower

Wages have been keeping a nice pace of growth in the UK during the last three years since the beginning of the coronavirus, growing between 4% and 7% on an annualized basis. Although, it does not show the whole picture since a large part of this growth goes as bonuses to high management of large corporations in the financial industry.

On the other hand, inflation has been growing even faster, exceeding 10% in September and it was expected to increase further to 10.7% in October. But, it too doesn’t show the whole picture, since the prices of everyday goods and services for the lower end of the population and the middle class have been growing a lot more, with Heinz tomato catchup increasing by more than 50% in the last two years for example.

Last week we saw a greater-than-expected retreat in US inflation, although it was unlikely to be repeated in the UK since prices are still increasing fast here. Energy continues to increase in Britain with household energy bills rising by 27% in October.

GBP/USD H1 Chart – Buyers Pushed Above 1.20 Yesterday

The 50 SMA turned into support after the retreat 

The situation for the GBP improved after the intervention by the Bank of England since September and the USD weakness has helped fuel the upside further for GBP/USD.  Last week we saw a surge after the softer US consumer inflation CPI, while yesterday this pair popped above 1.20 after the soft US producer inflation PPI. This morning the UK consumer inflation report was released, which showed yet another increase in October.

UK October CPI Inflation Report by ONS – 16 November 2022

UK CPI
  • October CPI YoY +11.1% vs +10.7% expected
  • September CPI YoY was +10.1%
  • CPI MoM +2.0% vs +1.7% expected
  • Prior CPI MoM +0.5%
  • Core CPI YoY +6.5% vs +6.4% expected
  • Prior core CPI YoY +6.5%
  • Core CPI MoM +0.7% vs +0.6% expected
  • Prior core CPIP MoM +0.6%

GBP/USD Daily Chart

GBP/USD
ABOUT THE AUTHOR See More
Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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