UK cycle: UR rise in Sep-18 is not disinflationary
- The unemployment rate rose by 5bps to 4.09% in Sep-18, contrary to expectations. Underlying momentum had already weakened enough to make this a real risk.- Rising vacancies and pay growth make this look more like a small supply shock than a disinflationary demand distortion.
- The BoE’s supply-side update in Feb-19 could allow it to temper disappointment in its forecasts. A further UR rise in Nov-18 is possible and would make an early 2019 rate hike difficult. Nonetheless, Brexit remains the primary uncertainty.
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