UK: Average earnings data eyed in employment report – RBC CM

Today’s UK average earnings data are arguably more important for GBP than the headline inflation data, suggests the analysis team at RBC Capital Markets.

Key Quotes

“GBP has failed to benefit from upside inflation surprises recently and this was again the case with yesterday’s May data. We put this down to the negative impact of higher inflation on real wage growth so long as nominal wage growth remains subdued.”

“Base effects are challenging this month, so we look for the including bonuses measure to slip to 2.3% 3m/y from 2.4% 3m/y and the ex-bonus measure to ease to 2.0% 3m/y from 2.1% 3m/y previously, leaving the consumer struggling to keep pace with price rises. It seems highly likely that the unemployment rate will hold at 4.6% after its surprising fall last month from 4.7%. The surge in the level of employment by 122k 3m/3m in the last report also forces up expectations for the employment gain this time around. Unless last month’s gains somehow turn out to be a total blip, it wouldn’t be too surprising if the level of employment rises again by close to a triple-digit number of thousands in the three months to April.”