After last week’s PMI extravaganza, the data calendar goes quieter this week:
Labour market stats on Wednesday
The labour market has been under close monitoring from the Bank of England over the past few years. In fact, the estimation of the amount of slack still present in the labour market has been a key area of debate amongst the Monetary Policy Committee members.
While the unemployment rate has consistently edged down – to just 4.6% in the three months to June 2017 – wages have been persistently sluggish. Indeed, average earnings growth slowed to 1.2% in June from 2.4% in May, taking the quarterly average to just 2.2%, the lowest in more than a year.
Dissenters in last month’s surprise 5-3 MPC vote highlighted that their tolerance for a period of above target inflation is wearing thin, with signs that domestic generated inflation has been emerging alongside the rising cost pressures from imported services and materials. Should wages surprise on the upside, the hawks in the Committee will have more ammunition to push their case for an interest rate hike in August.
If the Bank of England does decide to hike rates, that will mark the first interest rate increase in more than a decade.