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Short-End Gilts A Little Weaker Pre-BoE


Large put spread

--Data Show UK Hours Worked Picked-Up In Jan 
--Supporting ex-BOE Bean View Productivity Rise A Blip
     LONDON (MNI) - The latest UK labour market data show a sharp rise in hours
worked in November through January, bolstering the view of Charles Bean, a
senior official at the Office for Budget Responsibility, that the marked
acceleration in productivity growth in the second half of 2017 was a statistical
     The labour market data published Wednesday showed total weekly hours worked
rose by 0.6% in November through January on the previous three months, after
falling 0.3% on the quarter in the fourth quarter of 2017 and dropping 0.5% in
the third quarter. The apparent surge in productivity growth, measured as output
per hour worked, now looks ephemeral.
     In an interview with MNI last week Bean, formerly a Bank of England Deputy
Governor, said that as output growth and employment growth have come in as
expected in the second half of last year he suspected "it is the hours data that
is out of line."
     Bean said that the most likely outcome was that hours worked would rebound
in coming months. This would support the OBR's view that the data were erratic
and that productivity growth had not really turned a corner. "If it (hours
worked) bounces back in the next quarter or two ... that is consistent with our
story," Bean said.
     The first set of new data following he publication of the OBR's updated
fiscal forecasts have indeed showed a rebound in hours worked. The BOE also
suspected that the apparent productivity rebound was down to questionable data. 
     Bean's successor, Deputy Governor Ben Broadbent, said at the February
Inflation Report press conference that the reported drop in participation in the
labour market in the third quarter "looked a bit spurious or at least a bit
noisy," and that this flattered productivity.
     Both the OBR, which will not have to produce its next set of forecasts
until the Autumn Budget, and the Bank, will wait to see how things develop in
coming quarters. 
     "By the time we come to the Autumn Budget we should probably have enough
information to take a view on whether it was just plain measurement error," Bean
     The early data, however, suggest that his most likely scenario is on the
--MNI London Bureau; tel: +44 203-586-2223; email:
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MNI London Bureau | +44 203-865-3812 |