Economic Highlights

UK employment data was stronger than expected, with the unemployment rate falling to 4.7% for June, lower than the 4.8% forecast figure. Employment growth also continues to recover, with the 3-month/3-month figure at 95K, significantly stronger than the 25K forecast. July’s CPI print was slightly below forecast at 2% y-o-y versus a 2.3% forecast figure. However, there remain strong indicators that we are likely to see higher prints in the coming months given the combination of higher commodity prices and some sign labour market shortages. Retail sales data was somewhat weaker than expected, with the ex-auto fuel figure coming in at -2.4% for July, against a forecast figure of 0.1%. However, uncertainty remains whether consumer spending is rotating to services and away from retail goods as the economy has re-opened. More positively, government borrowing continues to fall, with net borrowing ex-banking groups coming in at £10.4bn for July versus £21.5bn in the previous month.

US retail sales for July were somewhat disappointing, with the ex-auto and gas print being negative at -0.7% against a forecast figure of -0.1%. There was some indication that the spread of the Delta variant and higher inflation had dampened consumer spending. However, the US labour market continues to be stable, with the initial jobless claims figure now at a pandemic low of 384K (a fall of 29K) for the week ending 14th August – the fourth straight decline in the print.

GDP data for the Eurozone confirmed a strong recovery in output in Q2, with a print of 2% quarter-on-quarter and the year-on-year reading coming in at 13.6%. The Eurozone inflation print for July was stable at 0.7%. However, as elsewhere, higher commodity prices are likely to lead to a further near-term inflation increase.

July's retail sales growth was a bit weaker than the consensus at 8.5% versus a forecast figure of 10.9% y-o-y. Similarly, July industrial production was also below consensus, with the figure at 6.4% versus the forecast of 7.9%. The surveyed jobless rate for July drifted a bit higher, with a print of 5.1% versus a consensus figure of 5%, due to a combination of a spike in student graduates entering the labour market and some evidence of a slowdown in economic activity.