Monthly Economic Review: The U.K

The Bank of England (BOE) decided to maintain the bank rate at 0.50% and asset purchases at £375B per month, explaining in the latest MPC meeting minutes that their economic outlook has “not changed materially” since the May Inflation Report was published. This suggests that a rate hike by next year is still in the cards since BOE Deputy Governor Nemat Shafik stated during a press conference that “the consensus view was that the most likely move is up not down, and I think that was a consensus view this time.” Employment As I discussed in my recent Global Jobs Update, the jobless rate for the February-April reporting period remained unchanged at 5.5%, but went down from 6.6% on a year-on-year basis. As for the average weekly earnings of regular employees, it went up by 2.7% (2.3% previous). The wage growth becomes even more significant if you consider that CPI fell by 0.1% in the year to April 2015 since that means buying power increased further. Claimant count change was disappointing, though, given that it decreased by 6.5K in May. Just as disappointing is the fact that April’s reading was revised to a 7.8K decline from a 12.6K drop. But it’s all good because a drop means less people are claiming unemployment benefits. The historical trend is a bit worrying, though, since the drops have become smaller and smaller Business Conditions Markit’s manufacturing PMI for June fell to 51.4 (51.9 previous), its 26-month low, due to subdued demand from Europe and a strong pound. Still, it’s been above the 50.0 mark for 27 consecutive months now, indicating that expansion is still steady. On a more upbeat note, June’s construction PMI jumped to 58.1 from 55.9, thanks to a pickup in residential activity. Also, this was the fastest expansion in four months. Conclusion & Effects on the Forex Market Overall, the most recent data appear to be very robust. Perhaps the most noteworthy data point is inflation and how it jumped back into positive territory after a short decline. Also worth noting is how wage growth outpaced inflation because that would likely contribute to even more consumer spending in the long run.