17 Dec 2014
UK's strong domestic story boosted by wage data – ING
FXStreet (Barcelona) - James Knightley of ING notes that the UK labour data shows unemployment remained at 6%, indicating that the labour market is moving in the right direction, further anticipating UK’s GDP to grow around 3% next year.
Key Quotes
“UK labour data shows the unemployment rate remaining at 6% in October with employment having risen 115,000 over the past three months and unemployment falling 63,000. This is not quite as good as hoped, but shows that the labour market continues to move in the right direction.”
“There was better news on the wage front though with average weekly earnings ex bonuses accelerating to 1.4% 3M/YoY% versus 1% in September while excluding bonuses the growth rate is 1.6% versus 1.2% previously.”
“Separately, the BoE minutes to the December meeting show that Martin Weale and Ian McCafferty both voted for a 25bp rate rise, arguing that the labour market was tightening and it “was desirable to anticipate labour market pressures by raising Bank Rate in advance of them”.“
“However, the rest of the committee felt that the lack of inflation pressures justified the current stance and that “further increases in pay growth, as labour market slack continued to decline, would be required to be consistent with the 2% inflation target in the medium term”.“
“Nonetheless, the MPC acknowledges that a sustained oil price decline would “act as a stimulus to growth” while the decline in market interest rates see globally “would also provide support to economic activity”.”
“In our view, the UK domestic economy is in pretty good shape with GDP growth likely to be close to 3% next year despite the somewhat troubling external environment. However, with inflation set to fall below 1% YoY next month the BoE has plenty of room to leave policy ultra-loose despite the healthy domestic environment.”
“We had been thinking that the BoE may hike soon after the General Election in late 2Q14, but given the lack of inflation a 3Q move is looking more probable now.”
Key Quotes
“UK labour data shows the unemployment rate remaining at 6% in October with employment having risen 115,000 over the past three months and unemployment falling 63,000. This is not quite as good as hoped, but shows that the labour market continues to move in the right direction.”
“There was better news on the wage front though with average weekly earnings ex bonuses accelerating to 1.4% 3M/YoY% versus 1% in September while excluding bonuses the growth rate is 1.6% versus 1.2% previously.”
“Separately, the BoE minutes to the December meeting show that Martin Weale and Ian McCafferty both voted for a 25bp rate rise, arguing that the labour market was tightening and it “was desirable to anticipate labour market pressures by raising Bank Rate in advance of them”.“
“However, the rest of the committee felt that the lack of inflation pressures justified the current stance and that “further increases in pay growth, as labour market slack continued to decline, would be required to be consistent with the 2% inflation target in the medium term”.“
“Nonetheless, the MPC acknowledges that a sustained oil price decline would “act as a stimulus to growth” while the decline in market interest rates see globally “would also provide support to economic activity”.”
“In our view, the UK domestic economy is in pretty good shape with GDP growth likely to be close to 3% next year despite the somewhat troubling external environment. However, with inflation set to fall below 1% YoY next month the BoE has plenty of room to leave policy ultra-loose despite the healthy domestic environment.”
“We had been thinking that the BoE may hike soon after the General Election in late 2Q14, but given the lack of inflation a 3Q move is looking more probable now.”