Bank of England raised the interest rate, UK unemployment data go out tomorrow
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UK Unemployment/wages (Mar) – 16/05 – with the Bank of England raising rates again last week, attention returns to the robust nature of the UK labour market, as well as the resilience in wage growth which to all intents and purposes is helping UK consumers navigate their way through the current inflationary shock.
In February, wage growth unexpectedly remained steady for the 3 months to February at 6.6%. Bank of England governor Andrew Bailey has said on several occasions that the MPC expects inflation to cool and that the country needs to be careful about a wage-price spiral. We are currently nowhere near that given that inflation is averaging over 10% a month, and wages have lagged CPI since October 2021. Unemployment did tick higher in February to 3.8%, back to the levels it was in Q2 2022, although a lot of the rise may be down to people returning to the jobs market as the cost-of-living squeezes incomes further. Average earnings growth has remained resilient and looks set to rise further to 6.8%, from 6.6% in February, as more and more people secure wage increases above 10%.
European CPI (Apr) – 17/05
With the ECB stepping down the pace of its rate hiking cycle earlier this month, raising rates by 25bps, in response to a slight fall in core prices in the April flash CPI to 5.6% the governing council will be hoping that this early fall is confirmed in this week's final numbers, and thus ease the pressure on the ECB to hike further. ECB President Christine Lagarde was at pains to insist that the ECB was far from done when it comes to further hikes. Sadly, for her the market has a different view, and while headline CPI is expected to be confirmed at 7%, the sharp declines being seen in PPI suggests that we could be heading lower on the inflation front over the next few months.
China Retail sales (Apr) – 16/05 – retail sales in China saw a big rebound in March after 3 months of negative readings as consumer sentiment rebounded in the wake of Chinese New Year.
A rise of 10.6%, the highest number since June 2021 saw optimism increase that the Chinese consumer would help support the global economy in the wake of the easing of Covid-19 restrictions. Some positive updates from the likes of luxury goods providers LVMH, Hermes and Kering has also raised optimism that the Chinese consumer is back, although recent PMI numbers have suggested that the April rebound might have stalled in May. That's a story for next month with April retail sales expected to see the best performance since March 2021 with a rebound of 22%, although this needs to be set in the context of a year ago when a lot of the Chinese economy was in lockdown. Industrial production is also expected to see a strong pickup from the 3.9% seen in March, with a similarly strong number of 10.1%, and the best performance since March 2021.
