After a shaky start, sterling ended the day higher following some positive news for the economy. Unemployment fell by 57,000 in the three months up to June which in turn resulted in the lowest rate of unemployment since 1975. In addition, the statistics showed that the participation rate of people in work is 75.1% – the highest since 1971.
While this is all good news for the economy, the average earnings figures highlighted some concern from policy makers. This week we saw headline inflation posted a reading of 2.6% and yesterday we saw average earnings squeeze up slightly to 2.1%. What this shows is that real earnings are still lagging behind inflation by 0.5%.
Looking to the day ahead, we have another key economic indicator in the form of the UK retail sales. Consumer spending makes up about 70% of the GDP number and therefore a lot of emphasis is put on retail sales. The figure for August is expected to be fairly anaemic at 0.2% and sterling will likely react depending on what side of the figure it lies.