UK: Focus on inflation, employment and retail sales this week - BBH

Analysts at BBH point out that the UK reports inflation, employment and retail sales in the week ahead and the consumer prices may not have peaked yet in the UK, but they seem close.  

Key Quotes

“The quarterly inflation report released earlier this month suggested inflation will move above 3% in October and this will ostensibly lead to a letter from Carney to Hammond to explain.  Yet, with a little luck, inflation would have already begun easing by the time the letter must be delivered.”  

“Although the UK enjoys what economists consider full employment, wage growth has failed to keep pace with inflation.  Earnings are reported with an extra month lag from the employment data.  Earnings growth, excluding bonuses, rose 2.4% in the three months (annualized) in September 2016, and is expected to have risen 2.2% in the three months (annualized) through September 2017.  Meanwhile, consumer prices (CPIH) has risen from 1.3% in the year through September 2016 to 2.8% through September 2018.”  

“UK retail sales are expected to have stabilized after sharp falls in September.  Excluding auto fuel, retail sales may be flat after a 0.7% decline in September.  The year-over-year pace is likely to post its first contraction in 4 1/2 years.  It may prove temporary as the base effect will be favorable over the next couple of months.  However, the squeeze on household finances may not improve much until the spring.”

“For the eurozone, investors will get more details about data that have already been reported, like the estimate for Q3 GDP and the flash CPI.  The September industrial production data that are new are embedded in the GDP figures.  The take away is that the eurozone economy continues to operate at a strong pace.  The unexpected drop in the core CPI (from 1.1% to 0.9%) may be explained by quirks that do not reflect the general price level, like holiday packages, and some administered prices.”