Archive

December 17, 2024
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UK Wages Torch Dovish Feathers

  • UK unemployment stopped rising in October, with the 4.3% rate close to the average of the past 18 months. The underlying trend is only for a slight weakening after strength.
  • Employment and hours worked are booming, partly owing to recent revisions. The poor productivity performance raises the hawkish pressure from these activity data.
  • Resurgent wages compound the hawkish news as private pay jumps on not-yet-captured public sector settlements. These data torch the dovish case for cutting rates this week.

By Philip Rush

December 16, 2024
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PMIs Serve A Festive Party

  • Flash PMIs for December broadly exceeded expectations in the services sector, with the UK and EA rebounding and the US surging to highs more consistent with hikes than cuts.
  • A slight trend rise in the US unemployment rate suggests strength is partly structural but could be noise around cyclical strength. Global rates still don’t look tight.
  • We still expect persistent underlying price and wage inflation to truncate easing cycles earlier than most expect, following the norm for cuts without recessions, like in 1998.

By Philip Rush

December 03, 2024
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UK Revisions Raise Inflationary Pressure

  • Updated UK population estimates and projections drove a 402k upward revision to the employment level while unemployment was broadly unchanged.
  • With output and wages unaffected, productivity was weakened into a slight trend decline while implied unit wage costs are 1.3pp higher and stuck above 5% y-o-y.
  • Full typical passthrough to consumer prices reinforces the underlying inflation problem. The BoE should discount labour market data and cautiously hold rates in December.

By Philip Rush

November 28, 2024
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EA Activity Sentiment Is Floating Fine

  • Gloomy PMI data increasingly appear noisy as the equivalent ESI surveys broadly reveal resilient output and employment across sectors and countries.
  • Price expectations are also at or above their long-term averages, signalling sticky inflationary pressures rather than any dovish shock to below-target levels.
  • The ECB faces a consistent hawkish signal in a mirror of the dovish dataset that pushed it to cut in October. It should resist a 50bp cut in December, supporting EURUSD.

By Philip Rush

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