- Headline inflation slows to 6.83% on the back of a larger drop in energy prices and a moderation in food price hikes. But core inflation (ex-food, energy & alcohol & tobacco) remains stubbornly high, firming to 6.90% last month (page 3)
- Services inflation accelerated to a new secular high of 7.44% in July, due to a frenetic rental market and another jump in car insurance prices (page 4)
- Wage increases in the services sector hit 8.1% y/y, outpacing services inflation. Overall private sector wage growth reached 8.3% y/y in June (pages 2; 21)
- Real wages rising y/y for the first time since September 2021 (page 22)
- To be clear, some cracks appearing in the labour market data: the unemployment rate has increased to 4.19%, vacancies continue to fall, and employment on the LFS measure dipped too (pages 7-22)
- However, the jury is still out on whether this is a turning point for the jobs market. The wage data remain far too strong, and more timely PAYE data showed a big rise in payrolls in July (page 23) [caveat: these data are subject to large revisions]
- In any case, the GDP data surprised to the upside too, with strength across services, manufacturing, and construction (pages 29-33)
- Notably, real business investment jumped by an annualised 14.1% in H1. In y/y terms, business investment grew 6.7% in Q2. Transport equipment investment increased 29.1% y/y. Investment in intellectual property products also climbed 10.4% y/y (pages 34-35)
- Fiscal policy still too loose: the PSNB ex widened to £144.31bn in the twelve months to June. The PSNB ex is undershooting OBR forecasts, however, which is leading to calls for tax cuts ahead of the next general election. If heeded, this would exacerbate the gilt sell-off. Public sector debt has risen above 100% of GDP (page 46)
- Jump in mortgage rates is weighing on house prices. It has also hit the buy-to-let sector, which is reducing the stock of rental properties, helping to push rents up even higher. HomeLet rental prices are rising 10.3% y/y, which suggests the ONS ‘actual rentals for housing’ CPI (6.45% y/y) has further room to rise (pages 43; 48-52)
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