UK jobs market faces tricky winter, despite better data - ING

According to James Smith, Developed Markets Economist at ING, the chances of a second-quarter rate hike are fading rapidly, despite another great month for UK wage growth, and concerns surrounding Brexit will dominate the economic outlook over the winter. 

Key quotes:

“On the face of it, the latest UK jobs report looks a little more encouraging, and the Bank of England will be particularly pleased that wage growth has once again beaten expectations. In fact, at 3.3% year-on-year, regular pay is rising at the fastest pace since the crisis.”

“Rising wage growth is a key reason why we think the Bank of England’s preference is to raise rates again pretty soon, should a workable Brexit solution be found – although as the last few days have proven, that remains quite a big if.”

“Whichever way Brexit pans out, the one thing that looks more certain is that the Parliamentary vote may not happen until much further into the new year. For the economy, this greater uncertainty is likely to see an increased number of firms enacting contingency plans, or at the very least holding back on investment and hiring.”

“For these reasons, we think economic momentum will continue to stall as we move into 2019. The chances of a rate hike coming shortly after March are fading rapidly.”