This week

It was revealed this week that despite inflation still sitting in double digits, one section of society is still seeing their remuneration outpacing the cost-of-living crisis. Coming as part of what has been described as the most in-depth study into the UK’s youth economy, data shows that Britain’s youngsters are enjoying an 11% increase in their average annual “income”. It is six-year-olds that appear the most fortunate, having seen their pocket money rise 34% over the past year. For those with younger siblings, it was also quid’s in, with average earnings from babysitting leaping 24% in a year, topping £20. Some savvy children were also reportedly able to prise cash out of their parents for smaller tasks such as smiling in family photos or making tea for their parents or visitors.

Tuesday’s Average Earnings Index data made for interesting reading to say the least. Unfortunately, the data doesn’t include wages received for washing the car on a Sunday morning but did still show that growth in employees' average total pay (including bonuses) was 5.8% and growth in regular pay (excluding bonuses) was 6.7% in January to March 2023, much in line with consensus estimates. Dragging up the index, it was the finance and business services sector saw the largest regular growth rate at 8.8%, followed by the manufacturing sector at 6.3% and construction sector at 6.2%.

Continuing the labour theme, the research also suggests that instead of committing to the handing over a fixed regular sum to their children, parents have been favouring one-off payments, using special occasions and good behaviour as opportunities for extra generosity. Such a drop off in regular hours worked acts as something of a reflection of the US employment picture this week, with data showing the number of Americans filing new claims for unemployment benefits fell more than expected, showing yet more resilience in the economy. The numbers highlighted claims that state unemployment benefits dropped 22,000 to a seasonally adjusted 242,000 last week, with economists forecasting 253,000 claimants. Although there are some signs that the US economy has been cooling, the labour market has remained tight, with 1.6 job openings for every unemployed person in March, well above the 1.0-1.2 range that is consistent with a jobs market that is not generating too much inflation.

With confidence amongst youngsters to be able to negotiate a better financial package and monetise small tasks, it is fitting that the week closed with domestic consumer confidence, coming in at a reading of -27, with a reading below 0 showing pessimism. However, confidence did rise for the fourth consecutive month in May to the highest level since Russia’s invasion of Ukraine according to the survey. Interestingly, expectations for the general economy and their finances rose by four and five points respectively from last month. Another key metric, the index for tracking consumers’ views on whether this is a good time for big purchases also increased by four points to -24. That’s a lot of pocket money…

Next week

The coming week brings with it something of a treat for Francophiles, with both economists and tennis fans watching events in France during the beginning of the week.

 

With the French Open in full swing by Tuesday, S&P will also serve up France’s Flash Manufacturing and Services Purchasing Manager Index (PMI) readings, followed by equivalent data from Europe’s largest economy, Germany, as well from the UK and US. PMI readings prove so useful to economists due to the data acting as leading indicator of economic health, as businesses reacting quickly to market conditions, with their purchasing managers holding perhaps the most current and relevant insight into the company's view of the economy.

 

Staying in Europe, the European Central Bank (ECB) releases its Financial Stability Report on Wednesday, offering an assessment of the conditions in the European financial system and potential risks to stability. The bank will also offer baseline projections for the Eurozone’s growth over the short term, which can have a profound effect on both stock and currency markets, as such projections can provide an insight into future rate policy.

With the Bank of England having raised rates by another 0.25% the previous week, all eyes will be on inflation figures released during the middle of the week, with many hoping price rises are beginning to reverse from the long rallies consumers have endured over the past year. The data, released by the Office for National Statistics, is considered the UK's most important measure of inflation, and will be examined by the BoE and investors alike with the central bank leaving the door open to future rate hikes during the accompanying press conference.

With it almost being game, set and match for the week, there is just time for the release of US monthly Core PCE Price Index numbers. Predicted to make quite the racquet on the markets after its release on Friday, the data differs from normal inflation readings in that it only measures goods and services targeted towards and consumed by individuals. Adding even more importance to the figures is that this is reportedly the preferred piece of data for the US Federal Reserve, using it as their primary inflation measure.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used, you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding as at 19 May 2023.