There were a wide
variety of economic data released over the last couple of weeks, which painted
familiar themes for the UK economy.
While the labour
market continues to grow strongly, real wage growth remains weak and living
standards are still under pressure.
Recent CBI surveys
indicate some pick up in momentum in the three months to July, but growth
remains relatively tepid overall and expectations are for a slight softening in
growth in the near-term.
In their latest world
economic outlook update, the IMF continued to expect the global economy to
grow strongly, leaving their global growth forecasts unchanged for 2018 and
2019 (at 3.9% and 3.9%, respectively). However, they noted that growth is
becoming more uneven across countries & regions, with the UK and other
European countries (in particular) seeing their growth forecasts downgraded for
2018. Additionally, the IMF asserted that risks to the global outlook have
become more skewed to the downside amongst escalating trade tensions.
CPI inflation
remained unchanged in June for the third consecutive month, at 2.4%, the
joint-lowest since March 2017 and below consensus forecasts of a slight rise
(2.6%). Upward price pressures from transport and energy prices were offset by
downward movements from almost every other part of the CPI basket. In
particular, there was a sharp drop in clothing and footwear prices, which
seemed to be driven by larger-than-normal discounts at the start of the summer
sales.
The latest UK labour
market stats indicated that the workforce population remained in rude
health in the three months to May. The employment rate increased to 75.7%, up
0.3 percentage points on the quarter, bringing it back to the joint highest
since comparable records began in 1971. T
Looking at more
recent indicators of economic activity, the CBI’s Growth
Indicator – which consists of a composite measure of the CBI’s
distribution, manufacturing, and services surveys – reported that private
sector growth picked up in the quarter to July, with the balance of firms
reporting a rise in output standing at +14%, up from +6% in June.
The moderate
acceleration was driven by a recovery in sales growth for consumer services and
distribution – the latter reflecting a pick-up in wholesaling. Manufacturing
output continued to grow at a strong pace, but business and professional
services growth remained subdued. Looking ahead, private sector growth is
expected to ease slightly in the three months to October (+8%), as consumer
services loses steam and manufacturing growth eases.
Meanwhile, the
quarterly CBI Industrial
Trends Survey reported that manufacturing growth accelerated to its
strongest pace in a year. Export orders growth remained strong, outpacing
growth in domestic orders (which nonetheless picked up on the quarter).
However, investment
intentions in “intangible” areas (product & process innovation and training
& retraining) deteriorated and are now at their weakest since the financial
crisis. Growth in output and total orders are expected to slow moderately in
the three months to October.
