Daily Economic Outlook: 12 August 2015

The MPC's expectation that productivity growth in the UK should recover is expected to be supported by today's labor market data. Against a still-firm activity backdrop, momentum in the UK labor market appears to have slowed sharply recently. Employment in the 3 months to May fell by 67k relative to 3 months ago, and the headline unemployment rate rose to 5.6%, the first increase since late 2013. 

Within last month's report, the 7k rise in the timelier claimant count for June points to a further increase in the unemployment rate to 5.7% in the 3 months to June, and a further decline in employment, of around 65k. Notwithstanding ongoing strength in employment intentions surveys, such readings would raise questions about the tightening of the labor market, although they could conversely indicate that recruitment difficulties are increasing. 

"Meanwhile, the strong uptrend in earnings growth is likely to come up against unfavorable base effects in June. We expect pay growth to drop back to 2.7% on both the headline and ex-bonuses measures", states Lloyds Bank.

Ahead of this, euro area industrial production for June will provide the final input ahead of Friday's preliminary estimate of Q2 GDP. Weak readings from Italy, Germany and France point to a disappointing end to the quarter. 

"We forecast euro area wide industrial activity growth stagnated in June. Overall,  this would suggest a contraction in Q2 industrial production. However, given strength in activity in other areas, overall GDP is forecast to have expanded at a healthy 0.4% q/q in Q2", adds Lloyds Bank.