We’re into the summer doldrums. With many traders away on the beach markets activity is somewhat muted. The FTSE100 barely budged yesterday and opened up today only modestly ahead at 7,550 by 11am. That said, there isn’t a huge amount of optimism around as consumers prepare to tighten their belts after the summer holidays with energy price hikes looming and Labour’s plan to freeze energy prices means little unless the incoming prime minister borrows the idea.
With the housing market finally showing signs of cooling along with consumer sentiment, the vital signs from the UK economy are looking particularly gloomy. Indeed figures out today showed that he jobs boom of the past two years, which has seen vacancies in the economy soar to record levels, could be over - vacancies dipped to 1.27m while the unemployment rate edged up by 0.1 per cent to 3.8 per cent for the second quarter. Meanwhile, wages are failing to keep pace with inflation with average wage growth of 4.7 per cent in the quarter meaning that real wages fell by 3 per cent as inflation soared - the sharpest drop since records began at the start of the century.
Where does inflation go from here? Well, in the short term at least, the direction of travel remains upwards - witness data today from Kantar showing grocery price inflation running at 11.8 per cent in the past four weeks. And with industrial strife ongoing, some employers are agreeing to punchy wage rises in a bid to maintain pace, something which can create a self fulfilling inflationary spiral - BA employees are to receive a 13 per cent pay rise, although some of this is reversing cuts imposed during the pandemic.
Read Hermione Taylor’s take on whether inflation is unstoppable now no matter what central banks do.
Overseas, US shares edged higher yesterday while shares in China’s embattled property sector were boosted by news that China’s central bank was cutting lending rates in a bid to support the sector. Downbeat economic data from China yesterday was suggested as the main reason for the decline in the price of oil with further pressure on black gold this morning - Brent Crude was down 1 per cent in early trading on fears that a widespread global economic slowdown will dampen demand.
