Tuesday was marked by UK Industrial Production data. The seasonally adjusted UK industrial production index increased by 0.5% between February 2015 and March 2015. Analysts were predicting no change. This reflects increases of 2.6% in mining & quarrying and 0.4% in manufacturing, also above expected increase by 0.3%. In contrast, electricity, gas steam & air conditioning sector output decreased by 1.1% and water supply, sewerage & waste management output decreased by 0.3%.
On Wednesday UK job figures were released. The number of people claiming unemployment benefit in UK in April fell by 12,600, the smallest decline since March 2013, compared with a forecast from economists for a fall of 20,000. However, total average weekly earnings in the three months to March, including bonuses, rose 1.9% compared with the same period a year earlier, from 1.7% in February, and above predictions on incline by 1.8%. Excluding bonuses, pay rose by 2.2%.
The number of unemployed people fell by 35,000 in the first quarter to 1.83 million, bringing the unemployment rate to 5.5%, its lowest level since the three months to July 2008, in line with market expectations. Unemployment has fallen sharply since the middle of 2013, but earnings only recently started to inch upwards. Inflation plunged to zero percent in February and in March, pushed down by tumbling oil prices, meaning living standards are rising after a long period of earnings falling in real terms.
However, the focus was on BoE's Inflation Report Hearings. The Bank of England cut its forecasts for British economic growth over the next three years on Wednesday and cautiously backed market expectations that it will only start to raise interest rates in around a year's time.The central bank now expects economic growth this year of 2.5% it said in its quarterly Inflation Report, down from a 2.9% projection in February and closer to most other economic forecasters' expectations. The Bank said its growth downgrade was due to the fact that interest rates were likely to increase faster than markets had expected three months ago, as well as due to a stronger currency and a weaker outlook for house building and productivity.
BoE Governor Mark Carney said inflation was likely to pick up later this year."Although it could temporarily turn negative in the near term, inflation is expected to pick up notably towards the end of the year as past falls in prices drop out of the annual comparison," he said, speaking a press conference. "The MPC (Monetary Policy Committee) expects the past falls in commodity prices to be relatively short-lived and will therefore look through them in setting policy," he said.
This week markets will be looking at:
CPI/PPI Input (Tuesday 10:30)
MPC Official Bank Rate Votes/MPC Asset Purchase Facility Votes (Wednesday 10:30)
Retail Sales (Thursday 10:30)
CBI Industrial Order Expectations (Thursday 12:00)
Public Sector Net Borrowing (Friday 10:30)