UK wages growth tumbles; German investor morale falls
LONDON/FRANKFURT: Britain’s unemployment rate has unexpectedly dropped to 4.2 percent and wage growth has slowed to the lowest level in nearly two years, official data showed Tuesday.
LONDON: Pedestrians walk in the winter sunshine down Oxford Street in central London. Britain’s unemployment rate has unexpectedly dropped to 4.2 percent and wage growth has slowed to the lowest level in nearly two years, official data showed Tuesday. – AFP.
The unemployment rate for the second quarter compared with 4.4 percent in the three months to the end of May, the Office for National Statistics (ONS) said in a statement. Analyst consensus had been for a small rise in the rate.
The ONS added that wages growth, excluding bonuses, slowed to 5.4 percent from 5.8 percent over the same reporting period.
That was the lowest level since August 2022. “The number of job vacancies continues to decline, although the total number remains above pre-pandemic levels,” added ONS director of economic statistics Liz McKeown.
A busy week for British economic data sees the release Wednesday of inflation numbers, ahead of second-quarter growth figures Thursday. Together, the data could provide clues regarding the pace of future interest-rate cuts from the Bank of England.
“The further easing in wage growth will be welcomed by the Bank of England as a sign that labor market conditions are continuing to cool,” noted Ruth Gregory, deputy chief UK economist at research group Capital Economics. “This lends some support to our forecast that the Bank of England will press ahead with two more 25 basis-point interest rate cuts later this year.” The BoE earlier this month cut borrowing costs for the first time since the onset of the COVID pandemic in early 2020. This after UK inflation has fallen sharply from four-decade highs.
German investor morale drops sharply in August
Meanwhile, German investor confidence worsened more than expected in August, a survey showed Tuesday, as a hoped-for recovery in Europe’s largest but struggling economy remains out of reach.
The ZEW institute’s closely-watched economic expectations index fell to 19.2 points, a steep drop of 22.6 points from a month earlier.Analysts surveyed by financial data firm FactSet had predicted a smaller decline, to 34.3 points.
The August reading marked “the strongest decline of the economic expectations over the past two years”, ZEW president Achim Wambach said in a statement. “It is likely that economic expectations are still affected by high uncertainty, which is driven by ambiguous monetary policy, disappointing business data from the US economy and growing concerns over an escalation of the conflict in the Middle East,” he said. “Most recently, this uncertainty expressed itself in turmoil on international stock markets,” he added.
Germany, traditionally a driver of European growth, was the only major advanced economy to shrink in 2023 as it battled high inflation, an industrial slowdown and cooling export demand. The government expects the economy to grow slightly in 2024 on the back of easing inflation, but an unexpected contraction of output in the second quarter and a string of weak indicators have recently darkened the outlook. “The ZEW survey confirms the impression that the German economy is struggling to get back on its feet,” said Deutsche Bank economist Robin Winkler. — AFP.