Data released last week by the Office for National Statistics (ONS) showed that the UK economy continued to add jobs at a rapid pace over the three months to February. 179,000 jobs were created in the quarter, taking the total in employment to a new record high of 32.72m. Year on year, employment has risen by 457,000, which was entirely due to increases in full time jobs, rather than part time or self-employment. Over the quarter, there has also been a marked increase in the number of women entering the workforce, supporting anecdotal evidence that employers are targeting working mothers with more flexible working hours. As a result, the economic inactivity rate fell to 20.7%, the joint lowest on record.
Tighter labour market conditions have continued to put upward pressure on wages, with average hourly earnings increasing by 3.5% over the year to February. Such an increase will mean that workers will enjoy real pay rises, which should help stimulate consumption.
UK Inflation undershoots again
Unexpectedly, UK inflation remained stable during March at 1.9% as slowing food and video game prices offset rising fuel and clothing costs; the expectation was for an increase to 2%.
The current rate will be a boost to households with wage growth continuing to outpace price rises. This is a continued relief for consumers who, since the 2008 financial crisis, have faced the worst decade for real wage growth since the 19th century Napoleonic wars. This revival of consumer spending power, coinciding with the further falls in unemployment (as mentioned above) means that the UK customer is better positioned to cope with Brexit-related uncertainties.
Greek Bond Yields Drop
Following the country’s return to the international capital markets, Greek government bond yields have fallen dramatically. The yield on a 5-year Greek government bond is now 2.2%, down from 3.3% in February. The bond is now yielding less than its US equivalent, albeit in a different currency. The fall in borrowing costs illustrates the progress the country has made towards increasing its tax base and reforming government spending. The government now runs a budget surplus, which together with stronger economic growth will help shrink the still excessive debt burden. Nevertheless, there are likely to be many years of spending discipline required before the debt is cleared.
|UK 10 Year Gilt Yield||1.21||1.20||-0.01||-0.83|