Free Trial

Services prices and labour market tightness to concern the MPC

  • Just like in Germany and France (and a lesser extent the pan-Eurozone print), there has been a rebound in services output prices in the UK PMI.
  • These are said to be linked to continued wage increases and, as we noted with the German and French prints, are likely to be a concern for the central bank.
  • The MPC's recent communication has all centered around their view that the market is underpricing the persistence of inflation - and these data continue to point towards the potential upside risks flagged by the Bank.
  • The PMI output prices and labour market indications are given a decent weighting by the MPC. So although we don't think this will change any votes in December (we still look for 6-3), this data is signalling another potential delay to cuts next year (after a similar message from yesterday's Autumn Statement fiscal giveaway).
  • To us it makes sense that we are seeing gilts and SONIA under pressure in response to this data (see 9:39GMT comment).

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.