Pay growth is one of the things the Bank of England looks at when considering changes to interest rates.
There has been much speculation over whether the Bank will cut rates at its next meeting on 1 August, with the decision expected to be a very close call.
If wages are growing strongly, this can push up costs for firms, which they may seek to offset by increasing prices to consumers.
Inflation data released on Wednesday showed the rate unchanged at 2% – in line with the Bank ‘s target.
However, price rises in the services sector, which covers business such as restaurants and hairdressers, remained strong.
Ashely Webb, UK economist at Capital Economics said that, while the slowdown in pay growth was “encouraging”, he doubted it would be enough to offset concerns about persistent inflation in services.
“We now expect the Bank to cut interest rates from 5.25% to 5.00% in September instead of August,” he said.
Yael Selfin, chief economist at KPMG UK, said the “modest” slowdown in pay growth “offers some good news for those looking for a rate cut in August”.
“But with annual pay growth excluding bonuses at 5.7%, the Bank of England may be unwilling to risk an August cut in rates before the labour market has cooled sufficiently,” she added.
Pay rises in the private sector slowed to 5.6% from 5.9% in the previous three months, the ONS said, while it stayed unchanged at 6.4% in the public sector.
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