There is plenty of economic data emerging about the UK economy, from workplace and GDP statistics to house prices and inflation. But what picture is it painting?
For James Lynch, fixed income fund manager at Aegon Asset Management, the picture is mixed - but with plenty of bright spots for both those of a bearish and those of a bullish disposition.
For example, he notes that wages overall rose by more than expected, but says the growth came in public sector wages, with those in the private sector declining.
Therefore, overall, the wage growth was at a level above that expected by analysts forecasts, and Lynch says: “Depending on your starting view, you really can take what you want from it to support your argument.”
The state of the labour market was revealed in data, released on February 14, had those of a bearish disposition, such as John Greer, head of retirement policy at Quilter, noting a decline in the number of job vacancies in the economy decline.
Despite pointing out the bright spots, Lynch adds: “The one that matters most though is what the Bank of England thinks and whether they are interested in developments in private wages and service inflation.
"From the MPC’s point of view there is probably enough to suggest that because private sector wages have not accelerated, and indeed fell, this is an encouraging sign.
"The good news for the MPC is there is another employment report before they meet again to make their policy rate decision. If private sector wages fall again it is likely the majority of the MPC will see their job is done on rate increases."
Konstantinos Venetis, a director of Global Macro at TS Lombard, says: “Labour demand is cooling at the margin (vacancies are still high but reverting lower) and supply is showing signs of improvement (inactivity rates ticking down), so what likely lies ahead is stabilisation in pay pressures."
The latest Agents’ survey suggests that average pay settlements in {the first half of} 2023 are expected to be lower than those made in the second half of 2022.
He says this is in line with the message from other surveys that also point to sequential deceleration in wage inflation.
The labour data showed the total number of vacancies in the economy to be 1.13mn, a decline of 76,000 on the previous month, and this represents the seventh consecutive month in which the number of vacancies has fallen.
Vacant situations
That may be significant for the wider economic outlook as if the number of vacancies is falling, it implies the labour shortages in the economy may be easing, which may constrain the wage inflation in the economy which has been central to the Bank of England’s justification for putting interest rates up.
Another factor, highlighted by Helen Morrissey, head of pension analysis at Hargreaves Lansdown is the rise in the labour market participation rate, that is, the number of individuals in the economy seeking, or in, employment.
