Week Ahead 11th December

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After another very good performance for the manufacturing sector and some positive news about the Brexit process on Friday, this week prices and earnings will get our attention.

Is CPI on the right trajectory?

Last month the consumer price index slightly surprised analysts who were forecasting a year on year growth over 3%. This also probably surprised the BoE governor, Mark Carney, who had his pen already in his hand as Martyn wrote last month.

CPI is still well above the 2% target, however it looks like that we already passed the peak and we are slowly moving toward a less worrying price level. Consensus forecasts see November CPI, which will be released on Tuesday, still at 3%. If this is true, it would be the third month in a row with the same annual growth.

Earnings, any sign of acceleration?

On Wednesday, the ONS will publish data for the UK labour market. Unemployment is still expected to remain stable at 4.3%. On the other hand, some analysts are seeing some upward pressure on the earnings side. Expectations are for growth around 2.4-2.5% which will be higher than the one registered last month and in the months before. However, even if the data showed 2.5% growth, it would still mean that average earnings are contracting in real terms (the one adjusted for inflation). The wage puzzle may not be solved yet.

The BoE will remain vigilant

After the historical decision of six weeks ago, when the MPC voted to raise the Bank rate for the first time in a decade, on Thursday, no actions are expected with the rate remaning stable at 0.5%.

However, it will be interesting to check the BoE minutes in light of the first Brexit agreement found on Friday.

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