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The Week Ahead ...
The Week Ahead

09:30 Tues 18 June-Public Sector Borrowing Requirement (May): The PSBR began the year on a disappointing note, coming in above expectations, at £3.3bn. The consensus expects May's figure to stand at about £2.9bn which will be flattered by privatisation proceeds from the first sale of Railtrack shares, worth an estimated £1.1bn.

09:30 Wed 19 June-Minutes of 8 May Chancellor/BoE Governor Meeting Published.

09:30 Wed 19 June- Retail Sales Volumes (May): Sales grew 0.2% in April, 2.2% up on the year. Last month sales are expected to have grown more strongly, up 0.4% m-on-m, 2.5% y-on-y.

09:30 Thurs 20 June- M4 Money Supply (May): M4 is expected to have sustained buoyant growth last month, forecast up 0.5% m-on-m, 9.6% y-on-y. Rising consumer credit and mortgage lending is expected to have boosted M4 lending in May.

00:30 Fri 21 June-CBI Industrial Trends Survey (June): The survey is expected to remain gloomy about the prospects for the UK manufacturing industry.

The Week Just Past

There was better than expected news on retail price inflation last month, with headline growth slipping from 2.4% to 2.2%. RPIY inflation (ex MIPs & indirect taxes) fell from 2.6% to 2.3%. However, the government's targeted underlying rate (ex MIPs) fell less spectacularly, down from 2.9% to 2.8%

Headline producer output prices fell unexpectedly in May, reducing annual growth to 2.9%. Core output price inflation at 2.7% is now significantly below last July's peak of 4.8%.

Input prices fell much more sharply than expected last month, down 0.5% m-on-m, up only 1.0% y-on-y. The Chancellor referred to subdued cost pressures following last week's interest rate cut, and will be pleased with further evidence of lower input and output prices.

There were no real surprises from this week's labour market data. Unemployment fell 14,800 in May, with the rate of unemployment edging down from 7.8% to 7.7%. This is broadly consistent with the trend over the previous six months.

Whole economy earnings remained unchanged in April at an underlying rate of 3.75%, although there were changes in the sectoral composition. In manufacturing earnings growth was down to 4% from 4.25% in March.

Service sector wage inflation was revised up to 3.5% for February and March and stayed at that rate in April.

Manufacturers' unit wage costs rose 3.6% 3m-on-y in April, unchanged from the rise in March which was revised down from 4.1%. Downward revisions to labour costs reflect a boost to recorded productivity growth following an upward revision to estimates of UK economic activity.


The headline RPI rose 0.2% in May to 152.9, only half the increase reported in the same month last year, mainly reflecting subdued seasonal food price inflation. This helped push annual growth down to its lowest rate in 20 months.

Mortgage rate cuts following March's base-rate cut also helped to subdue the index. (Most of the impact of last week's 25bp rate cut will not feed through into theheadline RPI until late Summer).

The only sectors pushing inflation higher were motoring, travel costs, fuel and light.

RPI ex MIPs, the government's target measure of inflation, nudged down from 2.9% to 2.8%, in line with expectations.

At his annual Mansion House speech Eddie George, governor of the Bank of England, predicted that RPIX would fall within the government's 2.5% or below target in the next few months, but warned that robust consumer spending could threaten the target in the longer term.

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