12 December 2023
If you are covering any of the market’s biggest stories today, please find below a comment from Lindsay James, investment strategist at Quilter Investorrs:
“Data out today shows a picture of the UK labour market that is continuing to marginally soften, with annual average pay excluding bonuses up 7.3%, down from a rate of 7.7% over the previous period, whilst the number of vacancies declined 4.5% on the quarter. That said, post-covid economic ‘normalisation’ has been playing a significant part in the falling annual growth rate of pay-rolled employees, which boomed in 2022 and has since been returning to more regular growth rates of 1-2%. A continuation in this trend over coming months would however suggest ‘normalisation’ has turned into outright weakness.
“Whilst the Monetary Policy Committee may take some comfort from the declining rate of wage inflation ahead of the next rate setting meeting on Thursday, it is running ahead of headline inflation figures and so wages are still growing in real terms. Unemployment was however largely unchanged on the quarter, at 4.2%, and so for now, there is no particular reason for any change in messaging from the Bank of England.
“Inflationary drivers will remain in the spotlight later today as we receive monthly data from the US economy, coming ahead of tomorrow’s FOMC decision. Last month, inflation came in slightly lower than market expectations, subsequently supporting strong market performance in November – so it remains a crucial piece of information that helps to guide investors on the likely path of interest rates. With gas prices having declined 8% in October, this should help to see headline CPI continuing to fall albeit core inflation is expected to see less impact. With the latest US Survey of Consumer Expectations, published yesterday, showing that consumers now expect inflation to be 3.4% in 12 months time – down from 3.6% in October and a two-year low – policymakers will be encouraged that higher interest rates do now seem to be having the desired impact.”
