UK unemployment rate falls to lowest level since 1975
UK unemployment continued to fall during the three months to May, dropping by 64,000 to 1.49 million. This resulted in the official unemployment rate falling by 0.2% to 4.5%, the lowest level since 1975. Still, growth in employment is yet to feed through to greater wage pressures. Excluding bonuses, earnings rose by 2% year on year, falling further behind inflation which is running at 2.9%. However, it is expected that inflation pressures are beginning to top out, as the effects of the currency devaluation and oil price movements fall out of the annual figure. This, combined with a tighter labour market and a stronger global economy may lead to the return of real wage growth over the course of the next year.
On a national level, the housing market has now stagnated. Originating from London, where affordability is most constrained, annual house price growth slowed from 8 percent this time last year to 2.8 percent. To many, this will be a positive, as it narrows the gap between the growth in house prices and wages. While the structural drivers of undersupply low-interest rates remain, weakening demand from international investors, affordability concerns and political risks have helped stabilise prices in the shorter term. There is a strong link between the strength of the housing market and consumer spending. As a result, the slowing housing market may add downward pressure to consumer spending growth over the coming months.
Chinese GDP growth for the second quarter came in at 6.9%, exceeding expectations and the government’s target of 6.5%. While official statistics from the country are treated with scepticism by many, the announcement has been taken as a positive by markets. However, concerns remain over the drivers of this growth. The massive stimulus package released last year will be continuing to have an effect on these numbers, but of greater concern is the ever increasing level of debt and rampant housing market. The strong property sector was crucial for the first half’s strong rate of growth, and with experts warning of a bubble in many cities, a slowdown could have equally negative consequences.
|UK 10 Year Gilt Yield||1.3||1.289||-0.011||-0.85%|
UK inflation data for June is due to be released on Tuesday followed by retail sales numbers on Thursday.