This week brings some of the first post-Brexit statistical releases from the ONS. The key one (and not usually one we talk about, but a good first indicator of consumer activity after the referendum) will be retail sales for July – out on Thursday. We’ll also see if there are any labour market wobbles on Wednesday and what’s happening to inflation on Tuesday. The only manufacturing-related data this week will be EEF’s own Pay Bulletin at the end of the week.
First up tomorrow is inflation. CPI edged up to 0.5% in June, driven by increases in air fares and motor fuels. We have been forecasting a gradual pick-up in inflation, back to the 2% target by mid-2017. This will be aided by Sterling’s post-referendum plunge, which will feed through to CPI inflation in the form of higher import prices. However, the effects of this are unlikely to make a major appearance in the data for July. Indeed, an unchanged reading of 0.5% is looking more likely.
The world after Brexit
We hadn’t seen any indications that the labour market was being affected by any pre-referendum concerns with the unemployment rate continuing to head lower in the three month to May. Similarly average earnings also posted gains, rising by 2.3% in the year to the three months to May. We don’t predict any major referendum-effects to materialise in the June data. Although the Claimant Count data – which reports for July – might be worth a closer look than usual.
EEF’s Pay survey covering manufacturing has been pointing to more subdue growth in pay than official statistics, with average settlement levels hovering around the 1.7-1.8% mark for most of this year. A sharp movement in either direction in July – a month that traditionally sees relative few pay deals – seem unlikely.
Brexit v weather
Finally, retail sales data will give us a first steer on consumer behaviour in July. The confidence indicators point to the worst with consumers experiencing a major drop in sentiment about the outlook for their finances and the economy. Against that is summer finally arriving and some hefty high street discounting. We’ll see whether Brexit concerns or the weather won out on Thursday.