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Labour demand cools in UK but wages stay high

Edward Bell - Senior Director, Market Economics
Published Date: 13 September 2023


Labour market data from the UK showed some cooling in demand for workers with the three-month change in employment falling to -207k for the period ending July, down from -66k a month earlier. The number of job vacancies also fell in August to 0.989m, its lowest level since June 2021. The labour pool also edged lower, keeping the unemployment rate relatively contained at 4.3%. However, while the headline labour numbers suggest a cooling off in the labour market, wage growth remained elevated. Average weekly earnings ex-bonuses accelerated to 8.5% y/y from 8.2% in the prior three-month period which will likely firm up the argument for the Bank of England to carry out an additional rate hike when the MPC meets later this month.

Germany’s ZEW survey of investor expectations improved in September to -11.4 from -12.3, better than market expectations. The assessment of current conditions remained very negative at -79.4, weakening month/month. Recent data from Germany’s economy has been highly disappointing with industrial production and factor orders underperforming market expectations while inflation remains elevated. The European Commission expects that Germany’s economy will contract by 0.4% in 2023 before improving to 1.8% next year, the slowest among its EU peers.

Inflation in India slowed much more than markets had expecting, rising by 6.8% y/y in August and down from 7.4% a month earlier. A deceleration in food price inflation looks to have been behind the slower price growth with food prices rising by 9.9% in August compared with almost a 12% gain in July. Food prices could flare up again as monsoon rains have been lower than normal as a result of the El Nino weather occurrence. That could lead to smaller staple crops and keep inflation above the RBI’s target band.

Today’s Economic Data and Events

  • 10:00 UK industrial production Jul y/y: forecast 0.4%
  • 16:30 US CPI Aug y/y: forecast 3.6%
  • 16:30 US core CPI Aug y/y: forecast 4.3%

Fixed Income

  • US Treasuries closed mixed ahead of the release of today’s August CPI print. Yields on the 2yr UST added about 3bps to 5.02% while the 10yr was near unchanged at 4.2801%. Market pricing is still a little shy of 50% chance of one more rate hike from the Fed by the end of the year.
  • Emerging market bonds traded heavier overnight with yields up on Turkey 10yr local currency bonds by 58bps to 24.04% while South African 10yr yields added 2bps to 11.966%.
  • GCC credit also ticked lower with a Bloomberg region wide index down about 0.2%.


  • Currency markets will likely be on edge heading into the release of US CPI later today and the ECB meeting tomorrow. The broad dollar index pulled higher last night, largely as a result of JPY reversing some of its prior day gains. USDJPY added 0.3% to 147.08. EURUSD closed near flat at 1.0754 while GBPUSD pushed lower by 0.2% to 1.249.
  • Commodity currencies closed mixed with USDCAD moving in favour of the loonie, down 0.2% at 1.3553 while AUDUSD traded near unchanged at 0.6426 while NZDUSD fell 0.3% to 0.5904.


  • Equity markets were largely on the back foot yesterday as most of the major European and US equity indices ended the day lower. In Europe, the UK’s FTSE 100 was an outlier as it added 0.4%, while the DAX and the CAC dropped 0.4% and 0.5% respectively.
  • In the US, technology stocks performed especially poorly, and the NASDAQ dropped 1.0%. The S&P 500 closed down 0.6%, while the Dow Jones performed better with a loss of just 0.1%.
  • Locally, the DFM dropped 0.2% while the ADX added 0.4%. Saud Arabia’s Tadawul ended the day 0.7% lower.


  • Oil prices closed higher overnight with Brent futures adding 1.6% to USD 92.06/b and WTI adding 1.8% to USD 88.84/b. OPEC published its monthly oil market report, forecasting a 3m b/d deficit in oil market balances in Q4 this year. That would be near on the largest shortfall recorded and in isolation would lead to eye-watering price moves. At the same time, however, the EIA estimates a deficit of just 230k b/d for Q4, highlighting the substantial difference in view on supply reactions to high prices.