19 Feb 2015
UK: Sspare capacity being used up - Nomura
FXStreet (Bali) - Philip Rush, European Economist at Nomura, notes that Wed's UK labour data provided additional evidence that spare capacity is being used up.
Key Quotes
"Another strong labour market revealed the claimant count falling to historically stretched levels, with the LFS measures backing up the pace of improvement. Further signs of transmission to pay are occurring, consistent with spare capacity being used up."
"With little likely left now and rates still far below neutral, an inflationary positive output gap lies ahead, in our view."
"The BoE’s assumptions are broadly in agreement, but its growth forecast converges with potential, despite rates staying below neutral. There is thus an inconsistency that will eventually need to be resolved, probably abruptly."
Key Quotes
"Another strong labour market revealed the claimant count falling to historically stretched levels, with the LFS measures backing up the pace of improvement. Further signs of transmission to pay are occurring, consistent with spare capacity being used up."
"With little likely left now and rates still far below neutral, an inflationary positive output gap lies ahead, in our view."
"The BoE’s assumptions are broadly in agreement, but its growth forecast converges with potential, despite rates staying below neutral. There is thus an inconsistency that will eventually need to be resolved, probably abruptly."