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DMP: Some encouraging signs, but not coming fast enough

UK DATA
  • There were some encouraging signs for the BOE in the Decision Maker Panel survey with price, unit costs and wage growth expectations all falling further. However, these metrics are still probably falling slower than the MPC would like and realised wage growth and 1-year ahead CPI expectations have both increased - which will be unwelcome news for the MPC. Overall, we think these data reinforce the case for a June hike, but don't think there is enough in here to move away from a 25bp hike to 50bp (markets price in around 28bp at the time of writing).
  • Price growth: The mean single month expected price growth fell to 5.1% in May from 5.9% in April. This was the lowest single month rate since February 2022 and the 3-month average fell from 5.5% to 5.4%, the lowest since March 2022.
  • Expected wage growth also ticked lower - 5.2% on the single month rate from a peak of 6.3% in December 2022. The 3-month average fell to 5.4% (down from 5.6% last month and a peak of 6.0%). This is the lowest 3-month average since August 2022. However, realised wage growth ticked up to 6.7% on the single month rate - the cycle high.
  • Unit cost growth showed signs of easing on both expectations and the realised prints.
  • In terms of CPI expectations 1-year ahead moved back to 5.9% (from 5.6% in April and 5.8% in March and matching the February figure). 3-year ahead expectations have been 3.4-3.5% for 4 months in a row now.
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