Inflation data out on Tuesday
In April, consumer price inflation accelerated to 2.7%, increasing from 2.3% in the previous month. Due to the different timing of Easter in 2016 and 2017, air fares were the biggest contributor to the increase in the 12-month rate of CPI. Additional upward pressures came from the continuing pass-through of the sterling depreciation into higher consumer prices. This was slightly offset by the waning contribution from the energy component of inflation as oil prices fell back below $50 a barrel in April amid oversupply jitters while they increased the same month a year ago.
Inflation is likely to be unchanged in May. The pass-through of the sterling depreciation into higher consumer prices is still incomplete, suggesting price increases are still in the pipeline. On the other hand, downward pressures from oil prices is likely to be offset by utility bill hikes this month.
Labour market and earnings
Last month, the unemployment rate reached a 42-year low of 4.6%. The momentum in labour market conditions looks likely to continue as the number of job vacancies – defined as positions for which employers are actively seeking to recruit outside their business – was at a high level by historic standards (777,000 in the three months between February and April) and continued to rise in the past few months. It will be interesting to watch if the unemployment rate is set to decline this month.
The fall in unemployment has had no upward pressures on wage inflation so far. In the three months to March, growth in average weekly earnings for the economy as a whole continued to disappoint, decelerating to 2.4% down from 2.6% in the three months to December. There is no indication that this trend could reverse soon.