Week ahead 14th August

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This week we have data releases on two of the most keenly watched indicators of the UK economy – inflation and labour market data.

 

Inflation

On Tuesday the ONS will release inflation data for July. The consumer price index has been steadily ticking up since the turn of the year, as the large and sustained depreciation in sterling has filtered through to consumers, via rising input prices for manufacturers. In June, the CPI did take a step back, falling from 2.9% to 2.6%. However, we expect the CPI to regain ground this month, rising to between 2.7%-2.8%, and peaking later this year, at around the 3% mark.

 

Labour Market

The labour market has been a source of good news over the last 7 months, with the unemployment rate steadily falling, dropping to 4.5% in May. We expect the unemployment rate to drop further when the latest data is released on Wednesday, given that the number of people unemployed only needs to fall by a further 4000, in order for the unemployment rate to drop to 4.4%. Despite the strength of the labour market, wage growth inexplicitly remains weak. This trend is expected to continue this month, and given inflation’s upward trajectory, remains a concern for households, who have seen two consecutive months of negative real earnings.

 

Author

Economist

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