Here’s a Monday morning look ahead at the data and events relating to UK manufacturing.
On Tuesday we see what’s happening with inflation after April saw CPI inflation dip into negative territory for the first time (on a comparable index) since the 1960s. It’s not expected to stay this low, however, as some of factors that pushed inflation below zero, such as changes in air fares as a result the earlier timing of Easter, are temporary and likely to be unwound.
That said, we don’t expect inflation to jump up by much this month either. Across the economy, inflationary pressures remain low. This is evident in the manufacturing sector, with last month’s producer price index showing that manufacturers’ output prices continued to fall. Our recent Business Trends survey also pointed to subdued prices, with only a marginally positive balance of 1% of companies reporting increased prices on UK sales in the past three months. In addition to this, consumers’ expectations about inflation are also relatively subdued. We’re forecasting inflation to come in at just 0.3% over 2015 as a whole.
Labour market statistics
Wednesday sees the release of labour market statistics, which have long been a bright spot on the UK’s economic data. That said, last month’s data showed some signs of slowing improvements. For example, ILO unemployment saw its smallest fall since August 2013. A deceleration of improvement is in some ways a reflection of the good health of the labour market is now in. The employment rate has now reached a record-high level, and it’s likely that some of the slack in the labour market has now been used up. Nonetheless, we expect employment growth to continue, just at a slower pace than we’ve seen so far.
We expect a similar picture in manufacturing. In the last couple of years, jobs in manufacturing have grown for the longest sustained period since the late nineties. However, as with the labour market more generally, the pace of jobs growth looks likely to slow. We forecast manufacturing jobs will grow 0.4% over 2015 as a whole, compared with 1.6% in 2014.
EEF Pay Settlements
Adding to the picture of what’s happening in the labour market will be our own pay data, due to be published on Thursday. Last month we saw that the three-month average pay settlement had edged down from to 2.1% in April, from 2.2% in March, where settlements had remained for three months. Monthly average pay settlements have been trending between 1.9% and 2.3% since the end of last year. Will this trend continue? We’ll keep you posted.
Upcoming blogs from us this week…
Making business rates work for manufacturers
What’s happening with prices?
Infrastructure in the next parliament