CBI Confederation of British Industry : Economic update

Labour market statistics showed the number of people in employment rose by a strong 267,000 in the three months to November, the largest rise in almost 18 months, and the unemployment rate edged down to 5.1%. The unemployment rate is now slightly lower than just before the crisis began (5.2%), and is the lowest since early 2006. However, annual growth in private sector regular pay (excl bonuses) fell to 2.1% in the three months to November. This was down from 2.3% in the three months to October and from a peak of 3.4% in the three months to May.

Annual CPI inflation edged up to 0.2% in December (from +0.1% in November), the first time since January 2015 that inflation has exceeded 0.1%. The up-tick in inflation at the end of last year has proved more modest than was expected a few months ago, reflecting the further slide in oil prices.

CPI inflation is likely to pick up further during the early months of this year, as the sharp decline in oil prices in the second half of 2014 drops out of the annual comparison. However, given the renewed fall in oil prices in recent weeks, inflation is likely to remain below 1% until around the middle of this year, before rising gradually towards the Bank of England's 2% target in the early months of 2017.

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