Markets

U.K. Wage Growth Beats Forecasts But Still Lags Inflation

Published

7 years ago

August 16, 2017

U.K. Wage Growth Beats Forecasts But Still Lags Inflation

The squeeze on U.K. consumers continued in the second quarter, when the fastest inflation in four years ate into workers’ income.

Basic wages rose an annual 2.1 percent in the three months, lagging behind a surge in price growth driven by the pound’s decline in the wake of the Brexit vote. That left real incomes down 0.5 percent year-on-year, the Office for National Statistics said on Wednesday.

While households are still being pinched, the unexpected acceleration in wage growth and drop in unemployment pushed the pound higher. The currency climbed from the weakest level since October against the euro, and investors moved forward their expectations for a Bank of England rate hike by the end of 2018 to 89 percent, from 80 percent on Tuesday, according to short sterling.

Still, it’s a headache for BOE policy makers that wage growth has failed to sustainably pick up even with unemployment at the lowest in more than 40 years. Officials cut their forecasts for pay growth at this month’s Inflation Report, with Governor Mark Carney suggesting that “an element of Brexit uncertainty” was preventing firms from awarding bigger wage increases.

While the BOE expects the squeeze on U.K. pockets to continue for some months, it has said that inflation is near its peak and this may be as bad as it gets. For now, the feeble pay growth is weighing on consumer confidence — at its lowest level in a year — and damping demand in British stores.

With consumer spending accounting for a large part of the economy, there are broader implications. Growth slowed in the first half of the year, and economists surveyed by Bloomberg see expansion cooling to 1.5 percent this year from 1.8 percent in 2016, and losing even more speed in 2018.

Jobs Growth

Even with the weaker growth outlook, the lowest unemployment rate since 1975 should be driving up wages. There were 125,000 jobs created in the three months and the unemployment rate fell to 4.4 percent, the report said. That’s below the BOE’s equilibrium rate of 4.5 percent. In a further sign of labor-market tightness, the number of unemployed people per vacancy was at a record low of 1.9.

Total pay including bonuses rose 2.1 percent, the ONS said, also better than forecast. Adjusted for inflation, it fell 0.5 percent, slightly less than recorded the previous month.

The report also showed that productivity, as measured by output per hour, fell 0.1 percent in the three months through June, recording a second straight quarter of declines.

“It should be a real cause for concern that the U.K.’s productivity has fallen again,” said Ann Francke, chief executive of the Chartered Management Institute. “It’s becoming increasingly clear that decisive action is needed if we are to end this downward trend.”

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Decline for Third Consecutive Day on Weaker Economic Data and Inventory Concerns

Published

1 day ago

April 17, 2024

Samed Olukoya

Oil prices extended their decline for the third consecutive day on Wednesday as concerns over weaker economic data and increasing commercial inventories in the United States weighed on oil outlook.

Brent oil, against which Nigerian oil is priced, dropped by 51 cents to $89.51 per barrel, while U.S. West Texas Intermediate crude oil fell by 41 cents to $84.95 a barrel.

The softening of oil prices this week reflects the impact of economic headwinds on global demand, dampening the gains typically seen from geopolitical tensions.

Market observers are closely monitoring how Israel might respond to Iran’s recent attack, though analysts suggest that this event may not significantly affect Iran’s oil exports.

John Evans, an oil broker at PVM, remarked on the situation, noting that oil prices are readjusting after factoring in a “war premium” and facing setbacks in hopes for interest rate cuts.

The anticipation for interest rate cuts received a blow as top U.S. Federal Reserve officials, including Chair Jerome Powell, refrained from providing guidance on the timing of such cuts. This dashed investors’ expectations for significant reductions in borrowing costs this year.

Similarly, Britain’s slower-than-expected inflation rate in March hinted at a delay in the Bank of England’s rate cut, while inflation across the euro zone suggested a potential rate cut by the European Central Bank in June.

Meanwhile, concerns about U.S. crude inventories persist, with a Reuters poll indicating a rise of about 1.4 million barrels last week. Official data from the Energy Information Administration is awaited, scheduled for release on Wednesday.

Adding to the mix, Tengizchevroil announced plans for maintenance at one of six production trains at the Tengiz oilfield in Kazakhstan in May, further influencing market sentiment.

As the oil market navigates through a landscape of economic indicators and geopolitical events, investors remain vigilant for cues that could dictate future price movements.

Commodities

Dangote Refinery Cuts Diesel Price to ₦1,000 Amid Economic Boost

Published

1 day ago

April 17, 2024

Samed Olukoya

Dangote Petroleum Refinery has reduced the price of diesel from ₦1200 to ₦1,000 per litre.

This price adjustment is in response to the demand of oil marketers, who last week clamoured for a lower price.

Just three weeks ago, the refinery had already made waves by lowering the price of diesel to ₦1,200 per litre, a 30% reduction from the previous market price of around ₦1,600 per litre.

Now, with the latest reduction to ₦1,000 per litre, Dangote Refinery is demonstrating its commitment to providing accessible and affordable fuel to consumers across the country.

This move is expected to have far-reaching implications for Nigeria’s economy, particularly in tackling high inflation rates and promoting economic stability.

Aliko Dangote, Africa’s richest man and the owner of the refinery, expressed confidence that the reduction in diesel prices would contribute to a drop in inflation, offering hope for improved economic conditions.

Dangote stated that the Nigerian people have demonstrated patience amidst economic challenges, and he believes that this reduction in diesel prices is a step in the right direction.

He pointed out the aggressive devaluation of the naira, which has significantly impacted the country’s economy, and sees the price reduction as a positive development that will benefit Nigerians.

With this latest move, Dangote Refinery is not only reshaping the fuel market but also reaffirming its commitment to driving positive change and progress in Nigeria.

The reduction in diesel prices is expected to provide relief to consumers, businesses, and various sectors of the economy, paving the way for a brighter and more prosperous future.

Crude Oil

IEA Cuts 2024 Oil Demand Growth Forecast by 100,000 Barrels per Day

Published

2 days ago

April 16, 2024

Samed Olukoya

The International Energy Agency (IEA) has reduced its forecast for global oil demand growth in 2024 by 100,000 barrels per day (bpd).

The agency cited a sluggish start to the year in developed economies as a key factor contributing to the downward revision.

According to the latest Oil Market Report released by the IEA, global oil consumption has continued to experience a slowdown in growth momentum with first-quarter growth estimated at 1.6 million bpd.

This figure falls short of the IEA’s previous forecast by 120,000 bpd, indicating a more sluggish demand recovery than anticipated.

With much of the post-Covid rebound already realized, the IEA now projects global oil demand to grow by 1.2 million bpd in 2024.

Furthermore, growth is expected to decelerate further to 1.1 million bpd in the following year, reflecting ongoing challenges in the market.

This revision comes just a month after the IEA had raised its outlook for 2024 oil demand growth by 110,000 bpd from its February report.

At that time, the agency had expected demand growth to reach 1.3 million bpd for 2024, indicating a more optimistic outlook compared to the current revision.

The IEA’s latest demand growth estimates diverge significantly from those of the Organization of the Petroleum Exporting Countries (OPEC). While the IEA projects modest growth, OPEC maintains its forecast of robust global oil demand growth of 2.2 million bpd for 2024, consistent with its previous assessment.

However, uncertainties loom over the global oil market, particularly due to geopolitical tensions and supply disruptions.

The IEA has highlighted the impact of drone attacks from Ukraine on Russian refineries, which could potentially disrupt fuel markets globally.

Up to 600,000 bpd of Russia’s refinery capacity could be offline in the second quarter due to these attacks, according to the IEA’s assessment.

Furthermore, unplanned outages in Europe and tepid Chinese activity have contributed to a lowered forecast of global refinery throughputs for 2024.

The IEA now anticipates refinery throughputs to rise by 1 million bpd to 83.3 million bpd, reflecting the challenges facing the refining sector.

The situation has raised concerns among policymakers, with the United States expressing worries over the impact of Ukrainian drone strikes on Russian oil refineries.

There are fears that these attacks could lead to retaliatory measures from Russia and result in higher international oil prices.

As the global oil market navigates through these challenges, stakeholders will closely monitor developments and adjust their strategies accordingly to adapt to the evolving landscape.