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UK DATA: DMP Report Shows Bad News All Around

UK DATA
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  • Impacts from the Budget continued to dominate the DMP with 61% of firms expecting to increase prices, 54% to reduce employment and 37% to lower wages in response to the employers NIC contributions. These have stayed fairly constant for 3-months now with the exception of higher prices (which was only expected by 54% of firms a month prior).
  • Mean expected price growth picked up another 0.1ppt on the 3-month measure to 3.9%Y/Y in the 3-months to January (up from 3.5% prior to the Budget). While mean realised price growth remained at 3.8%Y/Y in the 3-months to January (same as December).
  • Mean expected employment growth posted another -0.1% on the single month measure (as it did in November but picked up to 0.3% in December). This puts the Y/Y 3-month average down to flat (0.024%). This was the lowest 3-month print since November 2020.
  • Mean realised employment growth saw the single month measure turn negative for the first time since August 2021 in January (-0.5%) with the 3-month realised employment growth number at 0.4%Y/Y in the 3-months to January (from 0.9% in the 3-months to December). This was the lowest 3-month print since October 2021.
  • Respondents estimates of current CPI inflation picked up for the first time since January 2023 to 2.6% (albeit still only lower in that period in December 2024). 1-year ahead expectations picked up on the 3-month measure to 3.0%Y/Y (the single month remained unch at 3.0%) while 3-year ahead expectations picked up a tenth (on the 3-month measure) to 2.8%Y/Y, but the single month reverted back to 2.7% (where it was in November).
  • Overall, there's little in this report to be happy about - price intentions increasing and employment intentions falling further.
  • It adds to the conundrum for the MPC - do they look through prices moving higher now and cut more aggressively, or do they still only cut quarterly due to the labour market slowing? The MPC had access to this data during their deliberations this month and this should already be baked into their forecasts.
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  • Impacts from the Budget continued to dominate the DMP with 61% of firms expecting to increase prices, 54% to reduce employment and 37% to lower wages in response to the employers NIC contributions. These have stayed fairly constant for 3-months now with the exception of higher prices (which was only expected by 54% of firms a month prior).
  • Mean expected price growth picked up another 0.1ppt on the 3-month measure to 3.9%Y/Y in the 3-months to January (up from 3.5% prior to the Budget). While mean realised price growth remained at 3.8%Y/Y in the 3-months to January (same as December).
  • Mean expected employment growth posted another -0.1% on the single month measure (as it did in November but picked up to 0.3% in December). This puts the Y/Y 3-month average down to flat (0.024%). This was the lowest 3-month print since November 2020.
  • Mean realised employment growth saw the single month measure turn negative for the first time since August 2021 in January (-0.5%) with the 3-month realised employment growth number at 0.4%Y/Y in the 3-months to January (from 0.9% in the 3-months to December). This was the lowest 3-month print since October 2021.
  • Respondents estimates of current CPI inflation picked up for the first time since January 2023 to 2.6% (albeit still only lower in that period in December 2024). 1-year ahead expectations picked up on the 3-month measure to 3.0%Y/Y (the single month remained unch at 3.0%) while 3-year ahead expectations picked up a tenth (on the 3-month measure) to 2.8%Y/Y, but the single month reverted back to 2.7% (where it was in November).
  • Overall, there's little in this report to be happy about - price intentions increasing and employment intentions falling further.
  • It adds to the conundrum for the MPC - do they look through prices moving higher now and cut more aggressively, or do they still only cut quarterly due to the labour market slowing? The MPC had access to this data during their deliberations this month and this should already be baked into their forecasts.