UK: Good news on the public finances, pay growth building – Capital Economics
|The strong set of labour market figures should dispel concerns that the recent weakness was a sign of things to come for UK economy, according to Ruth Gregory, UK Economist at Capital Economics.
Key Quotes
“Employment rose by a solid 88,000 in the three months to December, leaving the annual rate at a still-strong 1%. Admittedly, this was below the consensus expectation for a larger 173,000 increase and a rise in the participation rate pushed the unemployment rate up from 4.3% to 4.4%. However, pay growth seems to be starting to benefit from the recent strength of jobs growth at last. Indeed, annual growth rate of regular pay rose from 2.3% to 2.6% and with the latest pay settlement surveys still strong, a further acceleration in wage growth is in prospect.”
“Meanwhile, there was further good news on the public finances. January’s surplus of £10.0bn on the PSNB ex measure was the second-highest surplus on record since the data began in 1993. Admittedly, the surplus was lower than last year’s £11.6bn. But this was always likely to be the case, as self-assessment tax receipts collected in January 2017 were temporarily boosted by changes in the dividend tax rate. Barring a large deterioration in the final two months of the year, then, borrowing still looks on course to undershoot the OBR’s full-year forecast, of £49.9bn, perhaps by as much as £10bn. But having confirmed that there won’t be any tax or spending changes announced at the Spring Statement on 13th March, for now the Chancellor seems to be resisting calls to spend this cash.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.