Two official data releases are likely to monopolise our attention this week:
Spike in inflation likely to be pushed out to September
On Tuesday, the ONS will release inflation statistics for August. After a prolonged period of deflationary pressures in the economy, CPI inflation has steadily crept up over the year to reach 0.6% in July. The hefty depreciation in the pound since the Referendum has generated a wide consensus that inflationary pressures are building up through the supply chain as imports become more expensive. Not least by the Bank of England, which now expects inflation to overshoot its 2% target over the next two to three years, something rather unthinkable a couple of months ago. We see inflation remaining at 0.6% in August, but spike to 1.1% in September, as the base effects from low petrol prices drop out of the calculation and the plunge in the pound starts feeding through.
Earnings figures the focus for the labour market release
The labour market release on Wednesday is the first one containing data for the period after the UK’s decision to leave the EU. However, the period covered is the three months to July, meaning that the data only captures one month of post-Referendum activity. As such, we are unlikely to see any large movements in the unemployment figures. Perhaps of more interest are the earnings statistics; average earnings have been on an upward trajectory since the beginning of the year, posting 2.3% growth in the three months to June. However, unless earnings post some considerable gains, the increase in inflation means that consumers are likely to see their real disposable income deteriorating in July.