UK and EU Economies Diverging?

Posted Monday, March 20, 2017 by
Skerdian Meta • 1 min read

If you have been around in the last decade or so, you must have noticed the divergence between the UK and the EU economy. That´s if you consider the EU as a united front.

Obviously, the UK economy has been doing “great” compared to the counterparts across the English Channel. But Brexit is happening and the divergence is turning upside down.

Inflation is healthy in both economies and growth (GDP) is almost the same, but there´s one single economic piece which is making things too obvious. That´s the wages, weekly earnings, salaries, labour costs or whatever you call it in your country.

In the UK, the pace of the pickup in wages has been declining in the last few months, from 2.8% to 2.2%. That´s a very steep drop and if it continues like this we´ll see the wages decline for real.

The wider picture gets toxic if you add the increasing inflation in the UK. Less money in the pocket while the prices shoot up, it´s not hard to make the calculations.

In mainland Europe on the other hand, the wages are picking up nicely, not a lot but enough to make up for inflation and some more. The EU labour costs grew by 1.6% year/year against 1.5% expected, so you see the divergence. Europeans are getting paid more while the Brits are getting paid less.

Remember, that real Brexit hasn´t started yet. This is definitely positive for EUR/GBP in the long term. By the way, we opened another buy forex signal in this forex pair at the levels we opened last night´s signal, so go Europe.  

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