Daily Economic Outlook: 15th, July

Recent months have seen some signs of a slowdown in labour market activity. Employment growth has eased from a quarterly average of 225k in each of the first three months of the year, to 114k in the quarter to April, while the headline unemployment rate has stabilised at 5.5% in the last two monthly data releases. 

Nonetheless, pay growth has picked up sharply since the turn of the year and last month's 2.7% ex-bonuses print was the highest reading since early 2009. With the ongoing weakness in productivity growth, a continuation of this pickup would further boost unit wage costs and pose an upside risk to medium-term inflation prospects. Lloyds Bank anticipates sharp increases in both regular and headline pay growth to 3.0% and 3.3% respectively, alongside a third consecutive 5.5% print for the LFS unemployment rate. 

Elsewhere, the key event of the day is set to be Fed Chair Yellen's semi-annual testimony to Congress. The key focus will be the Fed's views on recent domestic data which largely point to a solid rebound in economic activity during Q2, says Lloyds Bank. However, her views on ongoing developments in Greece and China, and the potential knock-on effects for policy will be of additional interest. Today also sees speeches by FOMC members Loretta Mester and John Williams on the economic outlook as well as the June US industrial production release.  

"Finally, the Bank of Canada is expected to maintain the policy rate at 0.75%. However, with the economy having shrunk for four consecutive months, there is a risk of a cut," added Lloyds Bank.