Consumers are winning out as low petrol prices and the continuing supermarket price war drive inflation down.
Data out tomorrow is expected to show consumer price inflation for September fell to a five-year low of 1.4 per cent – well below the Bank of England’s target rate of two per cent.
However, weak earnings growth continues to put the squeeze on UK purchasing power, with August figures due on Wednesday likely to confirm the slow rate of pay increase.
Howard Archer, of IHS Global Insight, said: “How earnings develop over the coming months will play a crucial role in when the Bank of England starts to raise interest rates and how quickly they move.
“Significantly, in a September speech to the TUC, Bank of England governor Mark Carney stated that ‘we will be closely monitoring pay settlements that are bunched around the turn of the year and taking a steer from the pay of new hires as a potential leading indicator of pay pressures’.”
Other economic news out this week includes the British Retail Consortium (BRC) retail sales monitor, which is due out tomorrow and is expected to show a healthy rate of consumer spending.
Employment and unemployment figures, also due on Wednesday, are forecast to bring positive news.
Fabrice Montange, of Barclays said: “We expect the claimant count to decrease by a healthy 34,000, albeit somewhat slower than previous months. This should help drive the unemployment rate a tenth lower at 6.1 per cent.”
The corporate calendar starts today with reports from YouGov and Essentra. Tomorrow’s news comes from Ashmore, Bellway, Boohoo.com, Burberry, Carpetright, Hargreaves Lansdown, Immunodiagnostic Systems, Matchtech, Michael Page, Nanoco and SABMiller.
On Wednesday Arbuthnot, Connect Group, Secure Trust Bank and Vertu Motors are due to give figures. Fresnillo and Rio Tinto will also give their latest production reports.
On Thursday Game Digital and WH Smith give their final results, while BSkyB will give first quarter figures. Other updates are due from Booker, Diageo, e2v Technologies, Evraz, Ferrexpo, Man Group, Mondi, Rank Group, Rathbones, Renishaw, Speedy Hire and Telford Homes.
On Friday Provident Financial, Record and Travis Perkins all report.