UK Wage Growth Eased, German Inflation Cooled In February

Bridgette Randall
12 Mar, 2024
Frankfurt

European markets hovered near record highs amid interest rate uncertainties and mixed economic data in recent days. 

Benchmark indexes in Frankfurt, Paris, and London traded around the flatline as investors debated future rate paths, the global economic backdrop, and the ongoing weakness in consumer spending in the eurozone. 

 

UK Wage Growth Slowed, Unemployment Rate Expanded 

On the economic front, UK wage growth in the three months to January rose at the slowest pace since October 2022, the Office for National Statistics reported Tuesday. 

Regular weekly pay, excluding bonuses, rose 6.1% to £627 per week, slower than the 6.2% rise in the previous three months. 

Adjusted for inflation, regular pay increased 1.8%. 

Total pay, including bonuses, rose at a slower pace to £672 per week, and the growth eased to 5.6%  from 5.8%.  

The wholesaling, retailing, hotels, and restaurants sectors saw the largest annual regular growth rate at 7.2%, followed by the manufacturing sector with a 6.8% increase and the finance and business services sector with a 6.6% rise.

The unemployment rate in the three-month period to January increased to 3.9% from 3.8% in the previous three-month period, and employment levels eased to 75%. 

The number of people claiming jobless benefits in February increased by 16,800 from the previous month and 85,800 from a year ago to 1.585 million. 

The number of job vacancies declined by 43,000 in the three-month period to January to 908,000, and the vacancies declined from the previous quarter but are still significantly above pre-pandemic levels. 

The U.K. is battling with long-term sickness, and inactive people who are neither looking for work nor employed have increased to 21.8% of the population, or a near-record 2.7 million. 

 

Germany's Inflation Downtrend Continued in February

Germany's inflation eased to an annual pace of 2.5%, down from 2.9% in January and 3.7% in December, the Federal Statistical Office confirmed Tuesday. 

The inflation rate in the eurozone's largest economy has been cooling and dropped to the lowest rate since June 2021, when inflation stood at 2.4%. 

"The price situation for energy products continues to ease. The increase in food prices has slowed markedly and is now below the overall inflation rate for the first time in more than two years," said President Ruth Brand, President of the Federal Statistical Office. 

Weakening in energy prices drove the overall inflation lower, and the energy prices in February were 2.4% lower than in the same month a year ago, despite the ending of the government's energy subsidy in January. 

Energy prices for households declined at a faster annual pace of 3.6% in February, despite the introduction of higher carbon prices since the beginning of 2024.  

Excluding energy prices, the inflation rate was 3.1%, and excluding food and energy, the inflation rate was 3.4%. 

But still, hopes ran high after inflation dropped to the level last seen in mid-2021, in hopes that the worst of the pandemic-era cost of living crisis was nearing its end. 

Most of the decline in inflation is driven by the sharp fall in energy prices, and policymakers cannot take credit for the steady fall in inflation because prices are still significantly higher than pre-pandemic 2019 despite multiple interest rate hikes. 

 

Europe Indexes and Yields

The DAX index increased by 0.2% to 17,786.57, the CAC-40 index fell by 0.01% to 8,018.20, and the FTSE 100 index inched higher by 0.9% to 7,742.50.

The yield on 10-year German bonds edged up to 2.29%; French bonds inched higher to 2.74%; the UK gilts edged lower to 3.92%; and Italian bonds inched higher to 3.60%.

The euro edged higher to $1.093, the British pound inched higher to $1.278, and the U.S. dollar held steady at 87.67 Swiss cents.

Brent crude increased $0.63 to $82.84 a barrel, and the Dutch TTF natural gas decreased by €0.03 to €24.91 per MWh.

 

Europe Stock Movers

Energy stocks advanced following the rise in crude oil prices after tensions in the Middle East. 

BP plc advanced 1.6% to 479.10 pence, and Shell PLC gained 0.8% to €29.53. 

Generali increased 1.9% to €22.65 after the Italian insurance company reported a record profit in 2023. 

Oracle Corp. jumped 12.7% to €117.78 after the U.S.-based database company reported better-than-expected quarterly earnings. 

Hill & Smith advanced 2.4% to 1,894.0 pence after the infrastructure products and services provider reported record annual sales. 

Persimmon plc declined 3.3% to 1,329.0 pence after the UK-based home builder reported slightly lower-than-expected 2023 revenue earnings. 

Wacker Chemie gained 6.3% to €110.30 despite the German chemical company estimating a slight decline in 2024 revenue and earnings. 

Porsche Automobil SE increased 1.3% to €47.44 after the sportscar maker lifted its dividend but lowered its 2024 profitability outlook because of the launch of new electric and hybrid vehicles.