April 21, 2021
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UK: subdued reflation pressures in Mar-21

  • Inflation disappointed expectations again in Mar-21 as it only increased to 0.7% y-o-y on the CPI and 1.5% on the RPI, although the latter was precisely in line with our forecast (index at 296.9). Food and recreation prices were the main sources of weakness.
  • The CPI outlook seems slightly softer than we previously thought. Further increases remain likely, aside from a July blip, with the peak slightly over 2% in Nov-21. Subdued median inflation suggests underlying pressures are not reflating excessively.

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.