UK Inflation – The Stronger Sectors of the UK Economy Have Started to Soften Too
The strong sectors of the UK economy have started to soften recently. let's see if inflation will weaken again after the decline in August
Brexit has been affecting the British economy greatly. It first hurt the GBP right away after the vote, then the business sentiment deteriorated and the investments followed suit, due to the uncertainty. Then the trade war did the rest of the job. Manufacturing, construction, industrial production and then services fell into contraction.
But, other aspects of the economy, such as inflation, employment and earnings have been holding up pretty well. That has kept the Bank of England on a balanced mode, while other major central banks have turned quite dovish. Although, these aspects have been showing signs of weakness lately.
Inflation cooled off by 4 points in August, as last month’s report showed, both core and headline CPI. Yesterday’s reports showed that employment and earnings cooled off as well in September. These are not good signs and the BOE is taking notes.
Today, core CPI is expected to increase from 1.5% to 1.7%, while headline CPI is expected to increase to 1.8% from 1.7% in August. These would improve the situation a bit, but we might also see a decline, which would turn the BOE even more dovish. But, the GBP still remains very concentrated on Brexit, so I don’t think this report will have much impact on it. But, we must keep an eye, since it will start having an impact once Brexit is over.
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