27 October 2015

CBI Economic Update

Retail sales volumes (excluding. auto fuel) rose by a strong 1.7% in September, driven by both a rebound in food sales (2.3% - the first rise in three months) and growing non-food sales (0.8%). The underlying trend in sales growth firmed somewhat (with volumes rising by 0.9% in the three months to September), but remained below stronger results at the turn of the year. Solid consumer fundamentals should provide further support to the retail sector ahead.

The latest labour market statistics showed the number of people in employment rose strongly, by 140,000 in the three months to August, and the unemployment rate edged down to 5.4%, close to its pre-recession rate of 5.2%. Last week's data also showed in the three months to August, annual regular pay growth in the private sector (excl bonuses) rose 3.2%, down from 3.3% in the three months to July. Looking at the economy as a whole, pay growth stood at 2.8% from 2.9%.

CPI inflation dipped into negative territory in September, standing at -0.1%: lower than both the consensus forecast (of 0%), and the CBI's last forecast (0.3%). This is the first time that consumer prices have fallen since April (which itself saw the first negative CPI reading since 1960). However, CPI inflation is likely to pick up from the end of this year, as the fall in fuel prices drops out of the annual comparison.