UK wages and jobs data set to show cost of living squeeze continuing – business live

Wages growth expected to be steady at 2% with unemployment rate at 4.5%

The Italian economy grew by 0.4% in the second quarter, the same rate as the previous three months and in line with expectations.

Domestic demand offset a weakening trade position, and analysts said the figures suggested the country would meet its 1.1% annual growth target.

Italian GDP QoQ (Q2): 0.4% vs 0.4% expected, prior 0.2%.
Italian GDP YoY (Q2)): 1.5% vs 1.4% expected, prior 0.8%.

Over in Europe, there have been some better than expected economic growth figures from the Netherlands:

#Netherlands: Powerful Q2 GDP growth. +1.5% QoQ vs +0.6% est, +0.4% prev; +3.3% YoY #ECB #Nederland

Here’s a look at what is expected from the imminent UK data:

1. UK labour market statistics out today. And employment growth is expected to rumble on. Consensus is for a gain of 97,000 on Q1.

2. Earnings growth (excl. bonuses) expected to hold steady at 2%y/y, but that’s not enough to keep up with rising consumer prices.

Following yesterday’s unchanged, if still high, UK inflation reading attention turns to the latest jobs report and, specifically, the state of the country’s wages.

Including bonuses the average earnings index for the 3 months to June is expected to remain at 1.8%, meaning real wages are continuing to suffer under the tyranny of UK inflation (and explains Thursday’s expected fall in retail sales). Elsewhere in the jobs report the unemployment rate will likely stay at 4.5% for the second month in a row, while the claimant count change – the most up to date figure – is forecast to shrink from 5.9k to 3.2k.

Away from Europe for the moment, and ratings agency S&P has confirmed its view on Brazil after president Michel Temer survived a vote related to corruption charges. S&P said:

Since we placed our ratings on Brazil on CreditWatch with negative implications in May, the political landscape is somewhat more settled as President Temer survived a vote–by the Federal Electoral Court (TSE) in June and by Congress in August–related to corruption charges.

Meanwhile, the economy appears to have stabilised despite fluid politics, Congress passed a labor reform in July, and the government remains committed to advancing some pension reform, containing expenditure growth to minimise deviation from its primary fiscal targets, and advancing its active microeconomic reform agenda.

The week’s stock market revival is continuing as investors put aside concerns about North Korea and indulge in a little bargain hunting.

The FTSE 100 is up 0.5%, Germany’s Dax has opened 0.6% higher and France’s Cac has climbed 0.4%.

Wage growth is unlikely to pick up to 3% next year as the Bank of England is forecasting, says ING foreign exchange strategist Viraj Patel, while the pound is likely to continue to come under pressure:

The combination of lacklustre UK economic data and political noise has served to highlight the pound’s vulnerabilities this week and we expect these factors to further weigh on the currency.

The ‘hot, but not too hot’ core inflation release yesterday has all but silenced any 2017 Bank of England rate hike calls; markets see a ≈20% chance of a 25bp rate increase by year-end.

FTSE 100 expected to open +17 – early calls – BALFOUR BEATTY UP 2%, ADMIRAL DOWN 1%, CLS HOLDINGS UP 2%.

Stock markets are expected to continue their recent mini-revival, as last week’s turmoil amid the tensions between North Korea and the US fade further. (President Trump of course has other matters closer to home to deal with at the moment).

Here are the opening calls from IG:

Our European opening calls:$FTSE 7399 +0.20%
$DAX 12201 +0.20%
$CAC 5147 +0.13%$IBEX 10498 +0.16%$MIB 21758 +0.16%

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Continuing evidence of Britain’s cost of living squeeze is expected today with the latest wages and jobs data.

The most recent wages numbers saw weekly earnings excluding bonuses for June come in at 2%, up from 1.7% in May, an encouraging sign that we may have seen wages start to show signs of a rebound at a time when ILO unemployment is at and expected to remain at a 42 year low of 4.5%.

With employment levels at record highs any signs of a tighter labour market could well offer the pound some significant support which means that a strong wages number today could offer the Bank of England that “goldilocks” scenario of falling inflation and rising wages and potentially move the debate back to the timing of a possible rate rise.

The divergence between the price and wages growth will likely continue weighing on the real wages and cool down the inflationary pressures as a consequence. Under these circumstances, the Bank of England will be in a position to keep the interest rates at the current historical low levels for an extended period of time and walk the UK businesses through challenging Brexit times.

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