The UK election campaign will be one of two strategies. The Tories will build their case around their Brexit deal while Labour will try and create a narrative around the future for Britain over the next five years (trying to move beyond their promise to renegotiate and offer the deal to the electorate via a second referendum which is likely to be on the manifesto).
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UK employment market continued to soften over the summer, recording another rise in the claimant count. This is unsurprising given the Brexit related uncertainty and generally slower global growth environment. Employment growth slowed, particularly for male workers and the participation rate has dropped back.
Another positive outcome with price pressure easing across the board, both at a consumer price level and on the producer side. Sharp deceleration in core CPI particularly welcome, particularly when taken alongside rising wage growth which will help real incomes catch up with the losses sustained following the inflation surge that followed the Brexit referendum.
Better monthly GDP print which kept y/y growth rate at 1.0%. But this is still the lowest level (bar last month) since Aug 2013. Activity expanded across all sectors m/m. But looks more like respite than turnaround with Brexit uncertainty continuing to drag on sentiment and activity. Surveys continue to reflect this uncertainty amid weak orders and a sharp rise in firms operating below capacity.
Another positive surprise on the wages front with a strong pick up in the headline data. The rebound in weekly wage growth was partly due to a more favourable hours worked comparison though. Hourly wage growth has been steadier. Alongside steady inflation means real income growth has improved, continuing the recovery we’ve seen in recent months.
UK activity data for May somewhat better than expected, but this is largely due to volatility as industry juggled with the initial March Brexit data and resulting slide in production in April, notably the pre-planned auto sector shutdowns. The underlying picture is still one of weakening activity
Modest improvement in the UK wages story. But it still appears that nominal gains are topping out with data flattered by the number of hours worked (at 32.2 vs. 31.8 in the same period a year ago). The stabilisation in nominal growth rates is not necessarily bad news for consumption given that inflation also looks to be moderating again, certainly at the headline level.
While there was some deceleration in retail sales growth m/m in April the numbers still bettered consensus and looking at the y/y rates activity still looks solid. We’ve actually been in this growth range (4-6% ann. value) for pretty much the entire Brexit period, while volumes have increased more recently, after the initial hit from post-referendum inflation.
While the headline rate pushed up and there was a move higher in services, core inflationary pressures looked relatively stable in April. Future pressures look equally contained, in part reflected in steady PPI output prices. Sterling has been weakening but the rate of decline has, thus far, has been fairly measured
March output data was strong on the manufacturing side, amid inventory building ahead of the (since extended) end-March Brexit deadline. Construction and services ended the quarter on a weak note, leading to an overall dip in GDP in the final month of Q1.
Modest downside surprise in the consumer price numbers but really not that significant. There is little underlying price pressure now the full effects of earlier sterling depreciation have washed through. The main variance continues to come from energy/fuel prices.
Trade and output data surprising to the upside, boosted by what looks to be activity as firms seek to get ahead of the curve pending the previously expected March 29 Brexit data – which the March PMIs also showed amid a record increase in inventories (and not just compared to UK history, but globally).
UK January monthly GDP, industrial production, services output, construction & trade balance chart pack
UK January budget report chart pack
UK January labour market report & December wages chart pack
UK January retail sales chart pack
UK January inflation report chart pack
December industrial production and trade charts as well as monthly and quarterly (Q4) GDP breakdown
