Following the usual rhythm of releases this week sees the publication of labour market and inflation data. And while we don’t usually spend a whole lot of time looking at the retail side of things, sales for July, released on Thursday will be worth a closer look than normal.
Do we really need a crystal ball for the unemployment data?
In the past few months the story from the labour market statistics has been one of continued falls in unemployment – with new records on the numbers in employment being broken every month – and wage growth outpacing consumer price inflation.
I wouldn’t bet against this being part of the labour market story once again in this week’s release. But we’ll be looking out for any signs of an acceleration in wage growth – at the moment there’s little in the surveys to suggest pay growth has been ramping up, but a closer look at trends in vacancies, what’s happening to hours worked and the reasons people are in temporary or part time work might give us more of the picture on slack in the labour market.
Tuesday also sees ONS’s flash productivity estimate – this will cover only the whole economy in 2018q2. In the first three months of the year output per hour fell by 0.4% compared with the previous quarter – continuing the consistently disappointing trend of recent years. Is this quarter likely to show the UK economy breaking free from flat lining productivity growth? Er… probably not.
Consumer price inflation was steady at 2.4% in the past three consecutive months. Core inflation dropped back last month, but there was some upside from increases in household energy bills. We’re likely to see a bit more of this in the next couple of months as energy companies have announced increases and the oil price has picked up. Still we don’t that this will alter the trajectory off CPI to a great extent and it should be heading close to the Bank’s target at the start of 2019.
Let’s go shopping?
Hmm, seems not, though we’ll have a clearer picture how retail sales started the third quarter on Thursday. While there were expectations that good weather and temporarily being good at sport lifted the spirits of consumers, mounting survey data – most recently from Visa and IHS Markit this morning – suggests this didn’t last through July. Combined with more tales of bloodshed on the high street and it seems consumer spending is unlikely to drive stronger economic growth in the second half of the year.