The results of the DMP survey showed that annual inflation expectations of British companies remained unchanged in May, but wage growth expectations weakened compared to April. Bank of England policymakers have previously stressed that recent wage growth is a key issue as they prepare to ease monetary policy later this year.
The Decision Maker Panel (DMP) is a survey of Chief Financial Officers from small, medium and large UK businesses. The central bank uses it to monitor developments in the economy and to track businesses’ views. The May DMP survey was conducted between 10 and 24 May and received 2,317 responses.
The data showed that annual inflation expectations of companies remained at 2.9% in May. The three-month average fell by 0.1%, to 3.0%. Three-year ahead CPI inflation expectations were 0.1% lower at 2.6% in the three months to May, while the monthly data was unchanged from April at 2.6%. However, businesses expect their output price inflation to decline over the next year. Year-ahead own-price inflation was expected to be 3.9% in the three months to May, down from 4.0% in the three months to April.
Meanwhile, expected year-ahead wage growth declined to 4.5% (-0,3%) on a three-month moving-average basis. Annual wage growth was 6.0% in the three months to May (-0,2% from the three months to April). Firms therefore expect their wage growth to decline by 1.5% over the next 12 months based on three-month averages.
The survey also found that over the next year, firms expect the average interest rate on their borrowing to decline to 5.7% (-0.3% compared to April).