Archive

Japan CPI 2.7% y-o-y (consensus 2.7%) in Mar-24

- Japan's CPI inflation slowed by 0.1 percentage points to 2.7% year-on-year in March 2024, as expected.
- There was some downside news as core inflation slowed by a tenth further than the consensus forecast to reach 2.6%.

UK Stuck With High Services Inflation

• UK CPI inflation exceeded the consensus by 0.1pp as it only slowed to 3.2% in March, as we forecasted. Services inflation stuck at 6%, and high-frequency impulses increased.
• Persistently high pay settlements sustain wage and underlying price inflation above target-consistent levels. We only see services slowing below 4.5% in September.
• We expect the BoE to cut in November after the ECB and Fed. Further resilience in UK and global data could still cause all three to roll back even further.

By Philip Rush

EA Inflation Subdued Enough for the ECB

• The final EA HICP inflation print confirmed the downside surprise to 2.4% from the flash release. Progress gets more challenging as energy and food base effects wear out.
• Although services inflation is stuck at 4%, that is far better than the UK’s 6%, and the median inflationary impulse is broadly settling below the ECB’s target.
• Labour costs might remain inflationary, but the ECB seems to have sufficient confidence to cut in June unless the data surprise significantly to the contrary.

By Philip Rush

UK Paying More for Fewer Workers

• UK unemployment jumped surprisingly far in February 2024 to hit 4.2% as employment fell. More long-term jobless suggests this is neither a new shock nor too disinflationary.
• Average earnings growth surged by 0.7% m-o-m, meaning the wage bill still rose despite fewer jobs. Regular pay growth is in rude health at 6% y-o-y or 2.1% in real terms.
• Wage settlements are stuck at 5%, with a skew higher into April. Embedded inflation expectations are too high and demand tight policy despite some cyclical softening.

By Philip Rush