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UK labour market data due at 7:00BST

UK DATA
  • The Bank of England’s forecast for Q2 private regular average weekly earnings is 5.141%. This would be a deceleration from the 5.56%Y/Y in the 3-months to May and 5.88%Y/Y in Q1. 5/6 of the previews that we have read look for 5.2%Y/Y in Q2, slightly above the BOE’s forecast. The BOE forecast (rounded to 1dp) was unchanged from the May MPR forecast and we would concur that risks seem to skew to the upside.
  • We looked at two ways of looking at the data in our preview, and note that a deceleration for private regular AWE to 5.2%Y/Y in Q2 seems a reasonable estimate to us. A high 5.1%Y/Y is also a possibility (as forecast by the BOE) but anything lower than that would be a surprise (barring decent revisions).
  • For total AWE (which the BOE doesn't forecast) 7/11 previews that we read looked for 5.4% in the 3-months to June which the other 5/11 looked for 5.3% (down from 5.75% in the 3-months to May).
  • For the unemployment rate, most analysts are looking for a tick up to 4.5% - in line with a generally weakening of the labour market seen in survey data and in line with movements seen in the claimant count data over the past couple of months. However, the BOE looks for a marginal tick lower from 4.43% to 4.40%. Of the 12 previews that we have read, only JP Morgan has a base case of 4.3%, SocGen is at 4.4% while all other analysts are looking for 4.5%.
  • The claimant count will also be watched for any surprises - it has ticked up a little over recent months.
  • We think a September cut is unlikely (which markets currently price a 33% probability of) but not out of the question while November looks likely (and has 29bp priced - so isn't excessively pricing the probability of sequential cuts at the moment). Sequential pricing seems to be more driven by US weakness and the possibility of extra FOMC easing than anything communicated by the BOE. So we think pricing could still go a bit further here, but equally it could moderate on a strong report.
  • We therefore see two way risks to market moves today - particularly given we have US PPI later today and both UK and US CPI tomorrow.
  • Our full preview of both labour market and CPI data is available here.
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