The United Kingdom’s Office for National Statistics recently reported the country’s unemployment rate, which stands at 4.9 percent for the third quarter, and lower than expectations of 5.1 percent. However, unemployment is higher than September’s 4.8 percent.
November’s Claimant Count Change rose higher than expected at 64.300, after dropping by 29.800 in October. Analysts had expected it to climb by 50.000. This left the claimant count rate at 7.4 percent in November, higher than the previous month’s 7.2 percent.
Average earnings including bonus went up by 2.7 percent in Q3, higher than expectations and September’s figure, which stood at 1.3 percent. Excluding bonus, average earnings rose higher than expected at 2.8 percent, after the previous month's 1.9 percent.
“Vacancies have continued to recover in the latest period but are still below the levels seen before the impact of the coronavirus pandemic,” commented the ONS in its report.
The House of Lords Economic Affairs Committee said on Monday that the Treasury should move away from wage subsidies and focus on boosting jobs in sectors where they are needed. The committee also insisted on aiding young people and highlighted that it’s wrong to assume that the economy won’t need support just because a vaccine is now available.
So far, 1,869,666 COVID-19 cases have been reported in the United Kingdom, as well as 64,402 deaths, making it the second most affected country in Europe and the sixth in the world. A sharp rise in the number of cases pushed London’s local authorities to consider a strict lockdown, which is set to begin on Wednesday morning.
Economic Calendar
Beyond the unemployment figures, not many relevant data about the state of the British economy have been released recently, though some key figures were released last week.
Last week, the ONS reported that manufacturing production rose higher than expected, climbing by 1.7 percent in October (month-on-month) after rising by 0.2 percent in the previous month. In yearly terms, it dropped by 7.1 percent, better than the expected drop of 8.4 percent and after decreasing by 7.9 percent in the previous month.
Industrial production also rose higher than expected as it gained 1.3 percent (month-on-month) after rising by 0.5 percent in September. In yearly terms, it dropped by 5.5 percent, less than expectations of a 6.5 percent contraction and better than the previous month’s 6.3 percent fall.
The monthly gross domestic product increased by 0.4 percent, remaining in line with analysts' expectations, though lower than the previous month’s 1.1 percent surge.
Pound Sterling Surges on Brexit News
Positive news about the Brexit trade talks pushed the pound sterling higher, gaining 0.78 percent against the US dollar and recovering from the previous week’s 1.59 percent drop.
"Sterling sky-rocketed out of the gates at the Sunday open after EU/UK Brexit negotiators failed to reach an agreement over the weekend, but agreed to go the extra mile,” commented an analyst at Western Union.
The UK is now negotiating its exit deal with the European Union, and the prospects for reaching it are better after the British prime minister accepted that there is a need to ensure fair competition for British and European businesses. The European Union’s chief negotiator, Michel Barnier, expressed his optimism, though added that the path to an agreement remains “very narrow”.
Significant progress has not been made in this realm in recent days, though both the EU and the UK agreed to continue talks past the deadline. The UK is set to leave the European Union by January 1st.
UK Economic Data Mixed Though Solid
As already mentioned, the latest unemployment data was better than expected at 4.9 percent in Q3, surpassing forecasts of 5.1 percent.
Inflation data are also better than expected, as the Consumer Price Index rose by 0.7 percent in October (year-on-year). However, the figure is still way below the Bank of England’s inflation target, which currently stands at 2 percent.
On the other hand, the latest gross domestic product figure missed analysts' expectations, though improved from the previous quarter’s figure. In quarterly terms, the GDP rose by 15.5 percent in the third quarter after falling by 19.8 percent in the previous quarter. In annual terms, the GDP contracted by 9.6 percent, missing expectations of a 9.4 percent contraction and improving from the previously reported 21.5 percent drop.
It seems the Bank of England still entertains the possibility of setting negative cash rates, as the media have recently reported that the BoE has been consulting with UK lenders to see what preparations they need to make in case they decide to do so.
Not everyone is enthusiastic about this possibility. An analyst at HSBC commented that the BoE’s monetary policy committee should consider carefully whether setting negative interest rates would have the desired outcomes.
“Where we see places where they have already been introduced, Europe, Japan, Switzerland, we haven’t seen inflation rise and the growth hasn’t come back as strongly as one might have hoped,” commented the analyst.
Upcoming Events
Tomorrow, the ONS will be publishing both the Consumer and Retail Price Indeces.
Also tomorrow, Markit Economics will be publishing both the Manufacturing and Service PMIs.
On Thursday, the Bank of England will be publishing its interest rate decision.
Retail sales data will be reported on Friday.