UK unemployment continues to contract
The unexpected decline of unemployment to a 4 year low at 7.4% should be seen as new evidence of how sharp the current UK recovery is. It should also mean that the Bank of England (BoE) could consider raising rates earlier as its 7% threshold is not too distant. However, income growth has thus far failed to improve. Despite a decline in UK inflation, at 2.1% in November, total wages only rose to 0.9%, suggesting that living standards are not increasing. As a result, private consumption, a key driver in the current recovery, has stemmed from households cutting into their savings. However, debt-fuelled consumption is not a sustainable growth strategy and the recent restriction in the Funding for Lending Scheme (see our 9 December report) imposed by the BoE is likely to curb its contribution to growth going forward.
Read the full report: Market Research
MIG Bank