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It’s a blockbuster week for the economy, with a series of events that will help define the rest of 2022, as Londoners brace for a tough winter with a recession already potentially underway.
On Tuesday, we’ll explore the impact the slowdown has had on the labor market and on average earnings. The number of people employed in the third quarter is expected to decrease by 25,000, from a decrease of 109,000 in the previous three months. That would leave the unemployment rate at 3.5%, in another sign of the resilience of the job market as the recession teeters on the brink of becoming a full-blown recession.
That could signal that the Bank of England has more room to raise interest rates more quickly without hitting employment levels and job creation. The Monetary Policy Committee will meet after December 16. Average earnings data is also out on Tuesday, and is expected to rise to 5.5% without bonuses, up from 5.4%.
The headline inflation returns to focus on Wednesday at 7 p.m. It was driven by the crisis of the cost of living and the economic slowdown throughout the year, intensified by the invasion of Ukraine by Russia, which sent energy prices around the world. The Consumer Price Index (CPI) for October is expected to increase further in double digits, reaching 10.7% from 10.1% for September.
The Bank of England will be watching closely as it considers the size of its next rate hike and the likely peak they will need to reach to tame inflation and get back towards its 2% target. It seems that the Monetary Policy Committee still has a way to go, which means more pain ahead for mortgage holders, as the cost of home loans increases as a result,
Sanjay Raja, chief UK economist at Deutsche Bank, said: “Going forward, we continue to see inflation persisting. While we expect price growth to pick up more materially from the second half of next year, we still see the CPI on average of 8.2% in 2023 before pushing to 3.4% annually in 2024”.
There could be some hope from the Production Price Index, out at the same time, which is expected to move to 18% annually from 20%, which would leave it at high levels, but at least going in the right direction. .
The main event for the week comes on Thursday in Westminster, with a much anticipated Autumn Statement on the country’s finances. It will star Chancellor Jeremy Hunt, the man who took a wrecking ball to the short-lived government of Liz Truss and its “mini”-Budget, which caused a run on the financial assets of the United Kingdom and led to Rishi Sunak moving to Downing Street.
Hunt is expected to outline a series of measures – including both tax increases and spending cuts – to plug a hole in the public finances that is expected to widen to around £60bn. He is set to restore the Office for Budget Responsibility’s scrutiny of the plans, after he was dropped from his usual role last time, one of the key reasons previous plans have lost the trust of the markets.
Attention will also focus on the government’s plans for price caps on energy costs for households and businesses, already reduced at the end of April from their originally planned duration of two years
James Knightly, chief international economist at ING, the Dutch bank, said: “Our working hypothesis is that most households will be reimbursed at the Ofgem regulated price, which we estimate will average £3,300 per annum at current futures prices, from £.2,500 to the current level guaranteed by the government.”
As for the rest of the measures, he added: “Markets have generally given the new UK Prime Minister and his chancellor the benefit of the doubt when it comes to this week’s Autumn Statement next”.
The Chancellor has warned of a wide-ranging tax hike, telling the BBC that “everyone” will pay more, as the government seeks to demonstrate to global investors that it is taking a more sustainable approach to its finances after the chaos of the “mini”-Budget. just two months ago.
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