Simon French reflects –
Tomorrow is shaping up to be the most eagerly anticipated day of the year for UK macro data. Ok, so it really can’t compete with the start of the Premier League season but as economic “events” go I think it may just about trump Stoke vs. Villa…
Ever since Mark Carney’s “unreliable boyfriend” moment the markets have sought further guidance on the timing of the first rate rise. This guidance will come in the morning with the release of the Bank of England’s Quarterly Inflation Report. Here the Bank will update its estimate of size of the output gap in the UK economy. There is clearly a split within the MPC on the current size of this gap and the merits of an early start to the rate tightening cycle – so the words used and the fan charts provided in the report will be poured over by the markets for signs of a dominant view, perhaps even a consensus. MPC members have recently promised the markets that their decision will be ‘guided by the data’ – and the Inflation Report provides markets with the Bank’s most timely and detailed interpretation.
At the same time economists will have to use their speed-reading skills as the ONS releases June’s labour market data. Will the stellar performance of UK employment and the equally woeful performance of productivity and wage growth continue? Recent survey data certainly suggests so but if we begin to see signs of a pick-up in wage growth and productivity continue to flat-line you can start cutting the odds on an early 25 basis point rise.
Finally for those of you who prefer your economic data half empty rather than half full then stay in bed tomorrow, watch the wonderful repeats of Mork and Mindy, and make Thursday your big data day with the release of Eurozone GDP and Inflation. Expect sufficient pain in the data to all but confirm the start of Quantitative Easing from the ECB in September.