GBP Average Earnings Index 3m/y, Dec 16, 2025

Sterling Gains Momentum: Average Earnings Data Points to Robust Wage Growth and Potential Inflationary Pressures

London, UK – December 16, 2025 – In a closely watched economic release, the Office for National Statistics (ONS) today unveiled the latest Average Earnings Index for the three months to October 2025, painting a picture of continued robust wage growth in the United Kingdom. The actual figure came in at 4.7%, exceeding both the forecast of 4.4% and the previous reading of 4.8%. This upward surprise, while categorized as having a medium impact, is likely to be a significant factor for traders and analysts assessing the economic landscape for the GBP.

This key economic indicator, also known as the Average Earnings Including Bonuses, measures the change in the price businesses and the government pay for labor, crucially incorporating bonuses. The data, representing a 3-month moving average compared to the same period a year earlier, is released monthly, approximately 45 days after the month concludes. The next release is anticipated on January 20, 2026.

Why Traders Care: A Leading Indicator of Consumer Inflation

The significance of the Average Earnings Index for traders cannot be overstated. It serves as a crucial leading indicator of consumer inflation. When businesses face higher labor costs, a common practice is to pass these increased expenses onto consumers in the form of higher prices for goods and services. This dynamic directly impacts inflation, a key metric that central banks like the Bank of England closely monitor when setting monetary policy, including interest rate decisions.

Today's data, showing actual earnings growth at 4.7%, surpassing the 4.4% forecast, suggests that wage pressures are building at a faster pace than anticipated. While the growth has slightly decelerated from the previous 4.8%, the fact that it remains firmly above the forecasted level signals ongoing upward momentum in wages. This can be interpreted as a positive sign for workers, indicating their purchasing power may be increasing. However, from an inflation perspective, it raises a flag.

Decoding the Latest Release: What the Numbers Mean

The 4.7% actual figure for the three months ending October 2025 is a clear indication that the UK labor market is experiencing sustained wage expansion. This is a positive sign in isolation, reflecting a healthy demand for labor and a competitive environment for businesses seeking skilled workers. It suggests that employers are having to offer more attractive compensation packages to attract and retain talent.

However, the fact that this actual figure outpaced the forecast of 4.4% is where the intrigue for traders lies. A stronger-than-expected rise in average earnings can be a double-edged sword. On one hand, it can signal a robust economy with healthy consumer spending power, which in turn can support business revenue. On the other hand, as highlighted, it directly contributes to the cost-push element of inflation. If businesses are paying significantly more for their workforce, and this cost is then passed on to consumers, we could see a quicker ascent in the Consumer Price Index (CPI).

The usual effect in forex markets is that an 'Actual' figure greater than the 'Forecast' is generally considered good for the currency. In this case, a stronger-than-expected earnings growth might lead to expectations of higher interest rates from the Bank of England to combat potential inflationary pressures. Higher interest rates can attract foreign investment seeking better returns, thus increasing demand for the GBP. However, the medium impact classification suggests that while this is a positive signal, it may not trigger a dramatic market reaction on its own and will likely be considered in conjunction with other economic data.

The slight dip from the previous reading of 4.8% to 4.7% should also be noted. While still robust and above forecast, this marginal decrease might temper some of the immediate inflationary concerns. It could suggest a slight cooling in the pace of wage growth, albeit from a high level. Nevertheless, the overall trend remains one of significant upward pressure.

The Bigger Picture and Future Outlook

The Average Earnings Index 3m/y is a vital component of the ONS's economic reporting. The data's consistency and frequency (monthly) make it a valuable tool for tracking the pulse of the UK economy. The ONS's meticulous methodology, including the note about the source changing the series calculation formula as of January 2010, assures the reliability and comparability of the data over time. The exclusion of the "figure that excludes bonuses" for lack of significance further emphasizes the importance of the bonus component in capturing the full picture of labor costs.

As traders and economists look towards the next release on January 20, 2026, they will be keenly observing if this trend of strong wage growth continues. Any further acceleration could put greater pressure on the Bank of England to consider tightening monetary policy, potentially through interest rate hikes. Conversely, a noticeable slowdown in earnings growth might provide some relief on the inflation front, influencing different market strategies.

In conclusion, the 4.7% actual Average Earnings Index for the three months to October 2025, surpassing expectations, provides a compelling insight into the UK's economic health. It signifies a strong labor market and potentially growing consumer spending power. However, it also serves as a potent reminder of the underlying inflationary pressures that businesses and policymakers will need to navigate in the coming months. The GBP may see some positive sentiment due to these figures, but the ultimate impact will depend on how these wage dynamics translate into broader economic trends and subsequent monetary policy decisions.