Unemployment data from the U.K. showed a rise in jobless claims in October to raise worries after the progress seen in last months figures, thereby increasing speculations the economy would have a setback in the last quarter of the year.
Jobless claims showed a rise of 10.1 thousand, the fastest pace in more than a year, to 1.58 million, compared to estimates of no change and the previous reading of -4.0 thousands. Claimant count rate steadied at 4.8%.
On the other hand, ILO unemployment rate for the three months ended September dipped to 7.8%, recording a drop of 49,000 to 2.51 million, better than both prior and expected readings of 7.9%, whereas employment edged up 100,000 to 29.6 million.
The improvement seen recently in unemployment was largely attributable to the positive effect of the London Olympics which managed to create jobs in London, hence the amelioration may not continue over the coming months, especially as the most recent reports referred to a weakness in the economys key sectors.
U.K. PMI manufacturing showed a widening contraction to 47.5 in October from a revised of 48.1 and services showed an ease in expansion to 50.6 in October from 52.2 in September.
Todays report also reflected the weakness in consumer spending average weekly earnings surged just 1.8% in the quarter through September from a year earlier after the prior 1.7% increase.
In the third quarter, U.K. growth rebounded strongly to record an expansion of 1.0%, the strongest growth in five years, leaving three consecutive quarters of contractions, yet it seems that the pick up in third quarter growth is largely an artefact of special events such as the Olympic Games and probably there will be a drop again, where jobless claims in London rose by 2,900 in October with the unwind of the effect of the Olympic Games.
The European Commission in its autumn forecasts lowered its growth forecasts for the U.K. to 0.3% this year from 0.5% projected in May and 0.9% in 2013 from previous forecasts of 1.7%.
“The outlook for the remainder of 2012 remains bleak,” the commission said. “It is increasingly unlikely that net trade will give a positive contribution to growth this year and it will remain subdued next year,” the Commission said.
Last week, the BOE opted to leave both interest rate and APF quantity on hold, probably waiting for the FLS program, announced three months ago.
Yesterday, CPI for the year ended October rebounded sharply to 2.7% from 2.2% in September, lowering the ability of policy makers to add to stimulus, especially as BOE Governor Mervyn King said inflation is likely to remain above the banks target of 2% “well into next year.”
As of 10:30 GMT, the awaited BOE quarterly inflation report will be out with expectations of seeing a cut n growth forecasts and rise in inflation outlook.
Meanwhile, the cable remained high versus the greenback to trade around 1.5890 after opening todays trades around 1.5869, where the pair is expected to be more affected by the inflation report.