Wage levels in US, UK dependent on inflation numbers
In the latest Wage Price Index (WPI) release for Australia, the measure of changes in labor prices revealed significant shifts in the third quarter of 2023. The seasonally adjusted WPI increased by 1.3% for the quarter and 4.0% over the year, marking the highest quarterly rise in the 26-year history of the series. Notably, the private sector played a pivotal role, contributing a 1.4% increase, while the public sector saw a 0.9% rise, the highest for a September quarter since 2010.
Private Sector Drives Wage Surge
The Health care and social assistance industry emerged as a major player, driving a substantial 3.1% contribution to overall wage growth. Moreover, the overall proportion of jobs experiencing wage changes and the average size of hourly wage changes increased, resulting in the remarkable 1.3% quarterly growth. The annual rise of 4.0% stands as the highest recorded since March 2009.
Individual Arrangements Fuel Wage Growth
Digging deeper, individual arrangement jobs in the private sector were the primary force behind the growth, negotiating higher wages influenced by the Fair Work Commission Annual Wage Review 2022–23 and an elevated Consumer Price Index. While not the main driver, awards and enterprise agreement-covered jobs also experienced notable increases, surpassing historical contributions for a September quarter. The data reflects a dynamic labor market responding to pressures and the imperative to retain skilled workers in demand.
Core Inflation Trends
In October 2023, the UK experienced a slowdown in consumer price inflation, with the Consumer Prices Index including owner occupiers’ housing costs (CPIH) rising by 4.7% in the 12 months, down from 6.3% in September. The monthly increase for CPIH was 0.1%, a significant drop from 1.6% in the same month last year. The overall Consumer Prices Index (CPI) also exhibited a decrease, with a 4.6% rise over the 12 months, down from 6.7% in September, and no change on a monthly basis compared to a 2.0% rise in October 2022.
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Housing and Food Contribute to Decline
Housing and household services made the largest downward contribution to the annual rates for both CPIH and CPI, reaching the lowest levels since records began in January 1950. Food and non-alcoholic beverages also contributed to the decline, hitting the lowest annual rate since June 2022. The core CPIH and core CPI, excluding energy, food, alcohol, and tobacco, saw decreases in their annual rates, indicating a broader trend of easing inflation.
Catering and Wage impact
The annual rates for both CPIH and CPI were the lowest since November 2021 and October 2021, respectively. The main contributors to the decreased inflation rates were negative contributions from housing and household services, food and non-alcoholic beverages, and restaurants and hotels, with recreation and culture being the only sector providing a positive contribution.
US Producer Price Index
In October, the US Bureau of Labor Statistics reported a 0.5% decline in the Producer Price Index (PPI) for final demand, following a 0.4% increase in September. This marks the largest drop in final demand prices since April 2020. On an unadjusted basis, the index rose by 1.3% over the 12 months ending in October. Final demand goods saw a 1.4% decrease, driven by a 6.5% drop in energy prices, particularly gasoline. However, final demand services remained unchanged.
Decline in Final Demand Prices
Notably, the index for final demand, excluding food, energy, and trade services, experienced a 0.1% increase in October, marking the fifth consecutive rise and a 2.9% increase over the year. In the final demand goods category, the decline was influenced by a 15.3% drop in gasoline prices, while tobacco product prices increased by 2.4%.
Transportation and Warehousing up
Within final demand services, transportation and warehousing services rose by 1.5%, but this was offset by a 0.7% decline in trade services margins. Airlines saw a 3.1% increase in passenger service prices. Overall, these fluctuations contribute to a nuanced economic landscape, with energy costs and specific goods playing a significant role in shaping the overall Producer Price Index.
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