3 Numbers: UK inflation to fall below 1%, US SME optimism, US jobs
- UK consumer inflation expected to slip below 1%
- US small-business optimism finally recovering
- Job openings on track to rise to a 14-year high in the US
UK: Consumer Price Index (09:30 GMT) Inflation in Britain has been slipping further below the Bank of England’s 2% target lately and today’s update is expected to show a another round of deceleration. Consumer prices are projected to slide to a 0.7% year-over-year rate in December, down sharply from 1% in November, according to Reuters.
disinflationary momentum is building. Photo: Thinkstock
Economic conditions are still considerably stronger in the UK vs. the Eurozone, but the sight of lesser inflation will raise concerns about Britain’s growth prospects for the year ahead. The economy expanded by 0.6% in last year’s fourth quarter, according to last week’s update from the National Institute of Economic and Social Research (NIESR). “This is broadly in line with the average quarter-on-quarter growth over the last 18 months,” NIESER said in a statement.
One curious divergence from the lesser-inflation trend can be found in wages. While consumer inflation is sliding, average earnings are taking wing, albeit from a relatively low base. Earnings ex-bonuses, for instance, rose 1.6% during the August-through-October period vs. a year earlier, marking the first time in six years that pay increased by more than inflation.
Economists expect no change in today’s estimate for January, according to Econoday.com’s consensus forecast. But holding steady at a relatively elevated level will reinforce the view that business conditions are improving for the companies that are responsible for the lion’s share of employment growth in the US.
The improving sentiment is all the more encouraging because it comes at a time of stronger growth in jobs. For instance, the recent acceleration in the rate of increase for payrolls is conspicuous in small companies in recent months. ADP’s estimate for firms with 49 or fewer employees shows an average monthly increase of 101,000 in total workers for the four months through the end of last year – the best gain for that rolling window in over two years.
Today’s update on sentiment for small firms will likely reconfirm the case for thinking that this long-struggling corner of the US economy is poised for its best year of growth since the Great Recession ended.
The crowd expects that today’s release will bring more good news. The consensus forecast calls for a slight improvement in openings, according to Econoday.com: 4.875 million openings in November vs. 4.834 in the previous month.