Market Talk: UK economic data 'all pointing in different directions'

The UK has a new Prime Minister, but can its economic growth get a fresh start? The UK economy is forecast to have grown 1.1% year-on-year when second quarter numbers come out later this week, according to economists polled by Reuters. And there are also signs the job market is stabilising. A survey by KPMG today showed recruiters have stopped shedding staff after 45 months of negative numbers. While Hetal Mehta is Chief Economist at St James's Hetal, is there a recovery happening in the UK job market? We've been worrying about growing unemployment for some while, haven't we? Yes, I think there's a bit of mixed evidence really in terms of the state of the jobs market. So when we saw last month's numbers, it looked as if there was quite strong job creation after a very long period of job shedding. But then when you look at the wage numbers, they've now actually fallen quite significantly. We've got the weakest wage growth we've had in several years. And so there is something a little bit mixed about the picture, I think. When we look further ahead, some of the effects of the payroll taxes that were introduced. Well, the Bank of England, as you say, is closely watching pay pressure and other inflation worries. That's still coming fundamentally from energy prices, isn't it? But how much is it filtering through into the wider economy? So far, the inflation impact has been relatively contained. We see it in petrol prices, energy prices, as you say. But we never really quite got inflation all the way back down to 2% before this latest shock. And so there's still a fair bit of underlying inflation. And actually, as we go in the months ahead, we still have elevated energy prices. It's likely that inflation will pick up. And again, some of the measures that previous Chancellor took to keep inflation limited, they were temporary. And those will also fade and inflation is likely to end up there. Does that mean then that ultimately rates of inflation are down to what happens in the Middle East, rather than the Bank of England or policy in this country? In the near term, I think the energy picture in the Middle East situation is going to be a big driver of inflation. But if we look further ahead, though, I think it's quite likely that we see the underlying pressures of inflation, which we never quite got rid of, even before this latest shock, will still be there. And it will make it, I think, quite difficult for the Bank of England to go back to thinking about cutting rates, as was their intention earlier this year. And it's worth remembering, we have quite weak productivity in the economy. That's not also helping to bring inflation down. So longer term, it's more than just the situation. The Bank of England then has a tight balancing act when it next meets in the autumn. Can they avoid hiking, do you think? I think it's going to be very finely balanced. The next set of economic numbers will probably be quite a big influence. We know three MPC members at the last meeting did vote for rate hikes. But so much will depend on, you know, those underlying inflation pressures, the wage numbers coming through. So probably the smallest amounts of marginal information could sway a Bank of England MPC, which is quite finely balanced. Are you expecting to see policymakers divided among themselves again? I think we're going to see split votes for quite a long time. The economic indicators are all pointing in different directions and different members will put weight on, you know, various inputs. So I think it's quite likely. That was Hetal Mehta of St James's Place. Don't forget, you can watch more videos on Reuters.com.