Here’s a Monday morning look ahead at the data and events relating to UK manufacturing.
Inflation to gradually pick up
Inflation has been subdued throughout 2015, turning negative for first time in more than 50 years in April. The past two months have also seen negative prints, with the slump in global commodity prices releasing deflationary pressures across the UK economy.
Base effects from last year’s collapse in the oil price should start to drop out from the inflation calculation in November, pushing up CPI to around 0.2%. However, aside from these base effects there is little indication of a build-up of inflationary pressures in the economy. Producer prices continue to be weak, global commodity prices show no sign of a pick-up and core inflation remains at bay. This means that CPI inflation is likely to average around 1% for 2016 as a whole.
Has the labour market peaked?
On Wednesday, the ONS will publish labour market statistics for August to October 2015. The labour market has tightened progressively over the past 2 years, and the unemployment rate now stands at 5.3%, bang in line with its 2007 average. With the labour market moving closer to its pre-recession level over the course of 2015, drops in unemployment have naturally slowed.
We expect more of the same for this month’s release, with large declines in unemployment unlikely. On the flip side, the rapid erosion of labour market slack could put further upward pressures on wages.
In terms of manufacturing, the three months to June 2015 saw the first decline in workforce jobs, albeit a marginal one at -0.1%, after 9 quarters of consecutive growth. Challenging conditions for manufacturing over the summer could spell another negative print in Q3.
Monday: More on exports from Felicity Burch
Tuesday: Some investment figures from our latest Outlook report by George Nikolaidis
Wednesday: A look at the labour market statistics by Felicity Burch
Friday: Follow up on pay by Verity O’Keefe