UK: Better jobs backdrop clouded by Brexit for the BoE - ING

James Smith, developed markets economist at ING, points out that the number of people in work rose by 141,000 over the September-November period for the UK economy, relative to the previous three months.

Key Quotes

“More importantly for policymakers – regular pay growth matched last month’s post-crisis high of 3.3%. This again emphasises that firms are having to lift wages increasingly rapidly to retain and attract talent. Our recent analysis indicates that this story is most noticeable in the construction, IT and hospitality sectors, all of which are reporting high skill shortage vacancy rates.”

“While the perceived risk of a ‘no deal’ Brexit amongst investors appears to have fallen, businesses still have to work on the basis that an exit on WTO terms remains the default option on 29 March.”

“There is, of course, plenty of uncertainty surrounding all of this, but one way or another we expect the economy to have a turbulent ride over the next couple of months. For this reason, we think the chances of Bank of England tightening in the first half of this year are fading rapidly.”