Weekly outlook: UK braces for ‘eye-watering’ inflation and wage data

Sponsored by iShares

Ready to rethink your portfolio? Putting cash to work with bond ETFs

13 May 2022

|

Kirsten Hastings

Monday 16 May

– Full-year results from Ryanair
– Trading statement from Greggs
– Rightmove UK house price index
– Chinese retail sales, fixed asset investment and industrial production growth data
– In the Middle East, quarterly results from Saudi Aramco
– In Asia, quarterly results from Tencent Music
– In Europe, quarterly results from Vodafone spin-off Vantage Towers
– In the US, quarterly results from Tower Semiconductor

Tuesday 17 May

– Full-year results from DCC, Vodaphone and Land Securities
– First-half results from Britvic
– Trading statement from TI Fluid Systems
– EU Q1 GDP growth
– US retail sales
– US industrial production and capacity utilisation rate
– US NAHB housebuilding industry survey
– In Asia, quarterly results from com and Sea Limited
– In Europe, quarterly results from Daimler Truck
– In the US, quarterly results from Wal-Mart and Home Depot

Wednesday 18 May

– Full-year results from Experian, Burberry and British Land
– First-half results from Future
– Trading statement from Aviva
– UK inflation figures
– EU inflation figures
– US oil inventories
– In Asia, quarterly results from Tencent
– In the US, quarterly results from Cisco, Target and Analog Devices

“The Bank of England has pushed through its fourth interest rate increase in sixth months after its warning that inflation could reach 10% towards the end of 2022,” said AJ Bell investment director Russ Mould and financial analyst Danni Hewson.

“The central bank has also warned of possible recession in 2023 to show what a difficult balancing act it has, between taming inflation on the one hand but not jacking up interest rates so far that the economy weakens badly on the other.”

The day before the inflation figures are released, “economists and central bankers will get to see the latest unemployment and wage growth numbers, which will give some feel for how well householders are coping (or otherwise) with the galloping increases in the cost of living”.

The pair pointed to the last employment dataset from the Office for National Statistics (or ONS), which covered the month of February. “It looked pretty rosy, overall,” they said.

Unemployment was 3.8%, below where we were before the pandemic; employment was unchanged at 75.5%, still a touch lower than before the virus; and wage growth was 5.4% year-on-year, to take an average weekly pay packet, including bonuses, up to £598.

But that’s where the good news stopped, “as inflation was running well ahead of pay growth”, Mould and Hewson said. For March, CPI was 7%, CPIH hit 6.2% and RPI was 9%.

Hargreaves Lansdown senior personal finance analyst, Sarah Coles, expects “some eye-watering price rises in the inflation figures […] because this is the month when the energy price cap hike feeds into the data”.

“It was already at 7% in March – a full percentage point higher than the Bank of England had forecast. The bank expects it to hit 9% in the spring, before rising to 10% by the end of the year, so we need to brace ourselves for bad news.”

Coles also pointed out that food prices are expected to continue climbing. “We’ve had plenty of warnings of how these are set to increase over the coming months as higher prices for farmers, manufacturers and distributors feed into the cost of food on the shelves. It means the price rises of some key staples are likely to be double-figures this month.”

Thursday 19 May

– Full-year results from National Grid, QinetiQ, Royal Mail, Great Portland Estates
– First-half results from easyJet
– Trading statements from Watches of Switzerland
– UK wage growth
– US weekly unemployment claims
– In Asia, quarterly results from Xiaomi and Grab
– In Europe, quarterly results from Generali
– In the US, quarterly results from Applied Materials and Manchester United