UK Unemployment Better than Expected, Pound Recovers

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Pound is pushed greater by optimistic unemployment information and remaining Brexit optimism; UK financial information is blended, although stable.

The United Kingdom’s Office for National Statistics just lately reported the nation’s unemployment price, which stands at 4.9 p.c for the third quarter, and decrease than expectations of 5.1 p.c. However, unemployment is greater than September’s 4.8 p.c.

November’s Claimant Count Change rose greater than anticipated at 64.300, after dropping by 29.800 in October. Analysts had anticipated it to climb by 50.000. This left the claimant depend price at 7.4 p.c in November, greater than the earlier month’s 7.2 p.c.

Average earnings together with bonus went up by 2.7 p.c in Q3, greater than expectations and September’s determine, which stood at 1.3 p.c. Excluding bonus, common earnings rose greater than anticipated at 2.8 p.c, after the earlier month’s 1.9 p.c.

“Vacancies have continued to recover in the latest period but are still below the levels seen before the impact of the coronavirus pandemic,” commented the ONS in its report.

The House of Lords Economic Affairs Committee mentioned on Monday that the Treasury ought to transfer away from wage subsidies and concentrate on boosting jobs in sectors the place they’re wanted. The committee additionally insisted on aiding younger individuals and highlighted that it’s unsuitable to imagine that the economic system received’t want assist simply because a vaccine is now out there.

So far, 1,869,666 COVID-19 circumstances have been reported within the United Kingdom, in addition to 64,402 deaths, making it the second most affected nation in Europe and the sixth on this planet. A pointy rise within the variety of circumstances pushed London’s native authorities to contemplate a strict lockdown, which is about to start on Wednesday morning.

Economic Calendar

Beyond the unemployment figures, not many related information in regards to the state of the British economic system have been launched just lately, although some key figures have been launched final week.

Last week, the ONS reported that manufacturing manufacturing rose greater than anticipated, climbing by 1.7 p.c in October (month-on-month) after rising by 0.2 p.c within the earlier month. In yearly phrases, it dropped by 7.1 p.c, higher than the anticipated drop of 8.4 p.c and after lowering by 7.9 p.c within the earlier month.

Industrial manufacturing additionally rose greater than anticipated because it gained 1.3 p.c (month-on-month) after rising by 0.5 p.c in September. In yearly phrases, it dropped by 5.5 p.c, lower than expectations of a 6.5 p.c contraction and higher than the earlier month’s 6.3 p.c fall.

The month-to-month gross home product elevated by 0.4  p.c, remaining according to analysts’ expectations, although decrease than the earlier month’s 1.1 p.c surge.

Pound Sterling Surges on Brexit News

Positive information in regards to the Brexit commerce talks pushed the pound sterling greater, gaining 0.78 p.c in opposition to the US greenback and recovering from the earlier week’s 1.59 p.c drop.

“Sterling sky-rocketed out of the gates at the Sunday open after EU/UK Brexit negotiators failed to reach an agreement over the weekend, but agreed to go the extra mile,” commented an analyst at Western Union.

The UK is now negotiating its exit deal with the European Union, and the prospects for reaching it are better after the British prime minister accepted that there is a need to ensure fair competition for British and European businesses. The European Union’s chief negotiator, Michel Barnier, expressed his optimism, though added that the path to an agreement remains “very narrow”.

Significant progress has not been made in this realm in recent days, though both the EU and the UK agreed to continue talks past the deadline. The UK is set to leave the European Union by January 1st.

UK Economic Data Mixed Though Solid

As already mentioned, the latest unemployment data was better than expected at 4.9 percent in Q3, surpassing forecasts of 5.1 percent.

Inflation data are also better than expected, as the Consumer Price Index rose by 0.7 percent in October (year-on-year). However, the figure is still way below the Bank of England’s inflation target, which currently stands at 2 percent.

On the other hand, the latest gross domestic product figure missed analysts’ expectations, though improved from the previous quarter’s figure. In quarterly terms, the GDP rose by 15.5 percent in the third quarter after falling by 19.8 percent in the previous quarter. In annual terms, the GDP contracted by 9.6 percent, missing expectations of a 9.4 percent contraction and improving from the previously reported 21.5 percent drop.

It seems the Bank of England still entertains the possibility of setting negative cash rates, as the media have recently reported that the BoE has been consulting with UK lenders to see what preparations they need to make in case they decide to do so.

Not everyone is enthusiastic about this possibility. An analyst at HSBC commented that the BoE’s monetary policy committee should consider carefully whether setting negative interest rates would have the desired outcomes.

“Where we see places where they have already been introduced, Europe, Japan, Switzerland, we haven’t seen inflation rise and the growth hasn’t come back as strongly as one might have hoped,” commented the analyst.

Upcoming Events

  • Tomorrow, the ONS will be publishing both the Consumer and Retail Price Indeces.

  • Also tomorrow, Markit Economics will be publishing both the Manufacturing and Service PMIs.

  • On Thursday, the Bank of England will be publishing its interest rate decision.

  • Retail gross sales information will likely be reported on Friday.

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