After disappointing news on wage growth yesterday for the Bank of England the day ended with some good news for it on this front. From the Financial Times.
The chief executives of the UK’s biggest listed companies received an 11 per cent raise last year pushing their median pay up to £3.93m, according to a report which found that full-time workers received a 2 per cent rise over the same period. The figures for FTSE 100 bosses include base salary, bonuses and other incentives and have been revealed at a time of growing shareholder activism over big payouts. Shareholders at companies including BT, Royal Mail and WPP have rebelled against chief executive pay at stormy annual investor meetings this year.
So some at least are getting above inflation pay rises Actually you can make the number look even larger if you switch to an average rather than the median as this from the original CIPD report shows.
If we divide this amount equally among all the CEOs covered by our report, they would each receive a mean annual package worth £5.7 million, 23% higher than the 2016 mean figure of £4.6 million.
Why is this so? Well a lot of it is due to a couple of outliers as this from the FT shows.
The highest-paid chief executive in 2017 was Jeff Fairburn at housebuilder Persimmon who received £47.1m, or 22 times his 2016 pay. Ranking second, Simon Peckham of turnround specialist Melrose Industries banked £42.8m, equal to 43 times his 2016 pay, according to the analysis.
The case of Mr.Fairburn at Persimmon is an especially awkward one for the establishment as he has personally benefited on an enormous scale from the house price friendly policies of the Bank of England and the UK government. As so often we face the irony of the government supposedly being on the case of executive pay which it has helped to drive higher. Indeed I note this seems to be a wider trend as Persimmon is not alone amongst house builders according to the CIPD report.
Berkeley Group Holding plc’s Rob Perrins, whose total pay package rose from £10.9 million in 2016 to £27.9 million.
If we step back for a moment and look at the trends we see that they have shifted in favour of higher inflation. A factor in this has been the US Dollar strength we have seen since the spring which was not helped by the unreliable boyfriend behaviour of Bank of England Governor Mark Carney back in April. So now we face as I type this an exchange rate a bit over US $1.27 meaning we will have to pay more for many commodities and oil.
Moving onto the oil price itself care is needed as whilst we have dropped back from the near US $80 for a barrel of Brent Crude seen at the end of May to US $72 we are up around 42% on a year ago. This time around the OPEC manoeuvering has worked for them but of course not us.
There are various ways these feed into our system and perhaps the clearest is the price of fuel at the pump where a 5 pence rise raises inflation by ~0.1%. We are also experiencing another impact as we see domestic energy costs rise as NPower raised on the 17th of June, SSE on the 11th of July, E.ON will raise them tomorrow and EDF Energy will raise them at the end of the month. These are of course not only the result of higher worldwide energy prices but also a form of administered inflation via changes in energy policy for which we foot the bill. People will have different views on types of green energy which are expensive but much fewer will support the expensive white elephant which is the smart meter roll out and further ahead is the Hinkley Point nuclear plant.
There was a small pick-up.
The all items CPI annual rate is 2.5%, up from 2.4% in June
Some of it was from the source described above.
Transport, with passenger transport fares seeing larger price rises between June and July 2018
compared with the same period a year ago. Motor fuels also made an upward contribution,
Another was from the area of computer games where we seem to have found another area that the statisticians are struggling with.
these are heavily dependent on the composition of bestseller charts, often resulting
in large overall price changes from month to month;
Let us hope that this clams down as we have plenty to deal with as it is! As to downwards influences we should say thank you ladies as we mull whether this is being driven by the problems in the bricks and mortar part of the retail sector.
Clothing and footwear, with prices falling by 3.7% between June and July 2018, compared with a smaller fall of 2.9% between the same two months a year ago. The effect came mainly from women’s clothing and footwear.
If we look further down the inflation food chain we see a hint of what seems set to come from the lower Pound £.
Prices for materials and fuels (input prices) rose 10.9% on the year to July 2018, up from 10.3% in June 2018.
In essence it was driven by this.
The annual rate was driven by crude oil prices, which increased to 51.9% on the year in July 2018, up from 50.2% in June 2018.
However in a quirk of the data this did not feed into output producer price inflation which dipped from 3.3% to 3.1%. Whilst welcome I suspect that this is a quirk and it will be under upwards pressure in the months ahead if we see the Pound £ remain where it is and oil ditto.
Here we saw what might be summarised as a continuation of the trend we have seen.
Average house prices in the UK have increased by 3.0% in the year to June 2018 (down from 3.5% in May 2018). This is its lowest annual rate since August 2013 when it was also 3.0%. The annual growth rate has slowed since mid-2016.
However there is a catch because even at this new lower level it is still considerably above what we are officially told is inflation in this area.
Private rental prices paid by tenants in Great Britain rose by 0.9% in the 12 months to July 2018, down from 1.0% in the 12 months to June 2018.
This is what feeds into what is the inflation measure that the Office for National Statistics has been pushing hard for the last 18 months or so. But there also is the nub of its problem. Actually they have problems measuring rents in the first place which affects the process of measuring inflation for those who do rent but then fantasising that someone who owns a property rents it to themselves has led to quite a mess.
As we look forwards we see the prospect of inflation nudging higher again. However there are two grounds for optimism. One is short-term in that the next two monthly increases for comparison are rises of 0.6 and then 0.3 in the underlying index for CPI .The other is that I do not think that the all the prices which rose back in late 2016 early 2017 went back down again so we may see a lesser impact this time around.
Meanwhile the issue around the RPI has arisen again. Some of it has been driven by Chris Grayling suggesting the use of CPI for rail fares. Ed Conway of Sky News has been joining in the campaign against the RPI this morning on Twitter.
Don’t let anyone tell you RPI is better/different because it includes housing. First, these days CPI does include a housing element.
To the first bit I will and to the second I am waiting for a reply to my point that CPI excludes owner-occupied housing. As it happens RPI moved downwards this month which will be welcomed by rail travellers as it is the number used to set many of the annual increases.
The all items RPI annual rate is 3.2%, down from 3.4% last month.