Pay pressures continued to ease over the summer in a sign that the risk of persistent inflation might be dissipating, according to a closely watched survey, .
Research from KPMG and the Recruitment and Employment Confederation (REC) showed that starting salary inflation for permanent members of staff dipped to its weakest level since March.
Temporary pay, meanwhile, rose at its weakest pace in three-and-a-half years.
Strong wage growth has been a concern for policymakers at the Bank of England due to fears that it could keep cost pressures elevated, particularly in the labour-intensive services sector.
Larger pay packets also mean consumers have more disposable income, enabling them to spend more on goods and services.
Neil Carberry, chief executive of the REC said, weaker pay growth should “reassure” the Bank that its decision to cut interest rates last month was “the right call”.
Jon Holt, chief executive of KMPG UK, said weaker wage pressures could “help make the case for more rate cuts” over the months to come.
The survey also revealed further signs of a weakening labour market, with the decline in permanent staff placements extending for the 23rd consecutive month.
The rate of contraction was the steepest since March amid reports of lower demand from clients and a lack of workplace vacancies, the report noted.
Candidate availability continued to increase for both permanent and temporary workers, although the pace of growth for permanent staff was the slowest since February.
“August is always a difficult market to judge because of the summer break, but this month’s survey supports what we have been hearing around the country – employers are still cautious,” Carberry said.
The survey comes ahead of the latest labour market figures, which are due out on Tuesday this week.
Economists widely expect to see a further easing in wage pressures, although there is some debate about what to expect with the unemployment figures.
Last month’s figures showed a surprise decrease in unemployment. Some economists expect this to reverse while others expect another marginal reduction in the unemployment rate.
Official measures of unemployment are still subject to unusual levels of uncertainty due to the well-publicised difficulties with the flagship labour force survey.