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UK inflation rate remains flat as employment levels fall.

By Orbex Blog

UK

Last week’s economic data for the UK was a mixed bag. While inflation remained broadly flat compared to the previous month, wage data indicated worrying signs as employment numbers fell.

This comes amid a SME survey result indicating that businesses were preparing to cut their overhead costs to keep up with the price increases. Brexit led uncertainties continue to remain as the major influencing factor on the economy and the businesses based in the UK.

The UK’s Office for National Statistics released the monthly inflation report and the September jobs report data this week.

UK consumer prices flat in October

The headline inflation rate in the UK remained unchanged at 3.0% marking a five-year high and unchanged from the previous month. Consumer prices stayed flat but recorded the fastest annual change since March 2012.

UK Economy

Economists polled were expecting inflation to rise 3.1%. Excluding the food and energy prices, the core inflation rate was also remained steady at 2.7%.

The report comes just a few weeks after the Bank of England voted to hike interest rates by 25 basis points to 0.50%. Growth in input prices at the factory gate slowed to the lowest levels seen since last year’s Brexit vote. Input prices were seen rising 4.6% in October.

This was slower than the 8.1% increase in PPI input from the previous month. The data suggested that following the decline in the pound sterling, the spur in price growth increased after years of weak inflation growth.

UK employment weakens as economy stagnates.

Official data on the UK’s labor market released last week showed that the nation’s employment numbers fell for the first time in nearly two years. The labor market report covering the three month period ending in September showed that the number of people dropping out of work rose significantly.

The data was a contrast compared to the previous months which showed that the UK’s labor market was growing solidly.

The nation’s unemployment rate remained steady at 4.3% for the three month period ending in September. This was the lowest unemployment rate in the UK for the past 40 years.

Despite the upbeat unemployment rate, the overall employment figures showed a decline of 14,000 for the period of July through to September, marking the first decline in nearly two years. The number of unemployed individuals, which includes those who are not seeking any work and are currently unemployed, rose by 117,000 for the period. This was the biggest increase in seven years.

Wage growth offered a glimmer of hope. The average annual wage growth was steady at 2.2%, but when adjusted for inflation, wages were seen declining by 0.5% excluding bonuses. With the UK economy driven by domestic demand, this was a worrying factor.

British SME companies concerned by Brexit

Last week, an industry survey was carried out by Odgers Berndtson International Search ltd. The survey report showed that nearly three quarters of small and medium sized businesses based in the UK were worried about rising inflation and the weaker exchange rate in the pound sterling.

An overwhelming amount of finance department officials at the SME’s surveyed said that they expect to absorb the highest costs and offset it by reducing overheads. The finance heads of the businesses said that they would most likely pass the cost of increases to the consumers.

The survey also showed that British SME’s were concerned about shrinking access to the job markets as the Brexit deal is likely to close doors to the EU labor market. This presents another dilemma, as most of the SME’s have already downsized following the 2008 financial crisis leaving little room to maneuver.

 

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About Louie Lewis

Louie Lewis
Successful forex trading starts with you first. Then comes the actual strategies and techniques. I have been involved with forex and forex trading for a few years now. It is a wonderful way to build wealth. The learning never stops and I want to help others along their journey into this wonderful market of opportunity.

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