Archive

April 20, 2021
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UK: mid-winter freeze in employment

  • The UK unemployment rate declined again to 4.9% in Feb-21 as the downwards bias from respondents during lockdowns extended. This effect remains likely to unwind after re-opening, just like it did after the initial lockdown.
  • Furlough continues to freeze the labour market in a state that is inconsistent with either prevailing output or the behavioural trends of the new normal. The tight labour is squeezing firms to raise wages and frustrating rebalancing forces by design.

April 16, 2021
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EA: inflation rising with a soggy bottom

  • EA HICP inflation for Mar-21 was confirmed at 1.3% y-o-y while the ex-tobacco index was marginally weaker than expected at 106.09 (Heteronomics: 106.12) for 1.26% y-o-y. Clothing was softer with transport and housing offsetting, mostly owing to Italy changes.
  • The headline rate is set to rise further from base effects over the next two months before slumping in July. A likely rise above target in the Autumn should be fleeting as underlying inflation provides a soggy bottom rather than a firm foundation.

April 16, 2021
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HEW: ECB and the RPI preview

  • Inflation data have dominated the release calendar over the past week, although Sweden and the final Euro area prints were in line with expectations. It’s the UK’s turn next week, where we expect mixed surprises, as explained in one of the previews below. We preview the ECB’s policy announcement on Thursday below too.
  • The UK schedule also contains the flurry of other monthly releases. We are a tenth above the consensus on wages, owing to the surge shown on payroll returns, and will be watching the March retail sales data as one of the first official releases covering the UK’s gradual re-opening. February GDP data on 13 April showed a pathetically flat performance, albeit with accompanying trade data rebounding from January disruption (see UK: trade rebounds better than GDP).
  • We also dug into the NextGenerationEU package, which attracted more attention this week when additional funding details were announced. Aspects of this could become more significant in the weeks and months ahead. We also remain sceptical about its ability to fix the fundamental flaws in the European project, which could be exposed by a less amenable German Chancellor (EU: Waiting in the wings for Hamilton).