UK inflation slows
Better news for the UK economy came this week, regarding inflation, unemployment, and wage growth. Although wage growth slowing can be seen as a negative, the Bank of England have been wrestling with this metric since just after Covid, as its inflationary. Whilst youth unemployment is far too high, a level of 5% is bizarrely quite good news because it takes pressure off potential wage growth in certain sectors.
The upshot of lower inflation is that it’s now more likely the Bank of England will cut interest rates in March.
We take a quick peek at global markets over the week, courtesy of LGT Wealth Management.
The ongoing tug of war on sentiment in the US continues, but many analysts warn not to neglect the US as part of one’s portfolio. Baillie Giffrord go even further and make a case for a new paradigm which will reward selected companies and investors.
The Federal Reserve is clearly struggling to find a consensus view amid conflicting data. Their minutes from Wednesday,which alluded to the possibilities of an interest rate hike, did not sit well with the markets, although their rhetoric is a case of “covering all bases”!
Finally, as conflict escalates and peace talks break down, defence stocks are on the march again.
This week’s content:
- UK unemployment hits a 5-year high and wage growth slows
- UK inflation falls to 3%, making a rate cut more likely
- Global markets: A snapshot of the week
- A new technology paradigm
- Ignore the US at your peril
- Investing in the inevitable
- S&P 500 is range bound
- Hawkish Federal Reserve minutes move stocks into the red
- Fund managers run it hot
- More people willing to invest in defence stocks.
- Conclusion
UK unemployment reaches a 5-year high and wage growth slows
According to the Office for National Statistics (ONS), unemployment rose to a new five-year high while private sector wage growth cooled.
The rate of unemployment rose to 5.2% in the final quarter of 2025. Wage growth also slowed, albeit with public sector workers more than doubling their earnings growth compared to the private sector.
The Budget may have had something to do with the numbers, as hiring slowed due to uncertainty, but it’s also because companies are now facing much higher costs for employees.
According to an article in Investment Week, who quoted George Lagarias, the Chief Economist at Forvis Mazars, “recent figures may eventually scare customers away from purchases, as household consumption constitutes over 60% of the economy”.
This inflation data is good news on the face of it, but not necessarily good for the economy. The question now is, will the Bank of England cut interest rates?
Continues…
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