Wage inflation is supposed to pick up once unemployment gets down to a level at which scarcity of labour means companies are forced to pay more for top talent. This time, at least so far, the theory is either not working so well, or taking its time to kick in. Or perhaps the modest rise we’ve seen is the best we’re going to get.
With Bank of England policymakers ready at a moment’s notice over the past several years to warn anyone who will listen that a rate rise is closer than we think or just around the corner or soon coming into sharper relief, the main instrument it targets – inflation at 2 percent – is having nothing of it.
One of the week’s biggest numbers is out at 0900 GMT with the ZEW report on sentiment in the German economy in October. This could give a first glimpse of perceptions on whether the VW emissions scandal is hurting the wider economy and comes after last week’s data signaling a drop in exports and weak industrial orders, largely down to a slowdown in China and other emerging markets.
Russia has denied assertions by U.S. officials that four cruise missiles it fired at Syria crashed in Iran, sticking to its version that they hit Islamic State targets as intended. With Iran also not confirming the incidents it may be some time before the full truth emerges which will only add to concerns about an escalation of the conflict and the risk of more trouble as U.S. and Russian forces jostle for Syrian airspace. Looking for further comment from U.S. Secretary of Defense Ash Carter during a London visit.
More bad news for the German economy as exports fell in August by the largest amount since the height of the global financial crisis in 2009. That comes after sharp declines in industrial orders and output in August that already signalled the fact that weak demand from abroad, particularly China, could be leaving its mark on the euro zone’s top economy. And this of course does not factor in any future damage to the image of German manufacturing from the VW emissions scandal.
As Germany marks a quarter century since the reunification of East and West in October 1990, Angela Merkel and Francois Hollande make a joint address from 1300 GMT to the European Parliament that needs to provide convincing arguments on the future solidity of a bloc facing unprecedented crises.
Portugal’s Prime Minister Pedro Passos Coelho emerged as the winner of Sunday’s general election, which is more than other pro-austerity leaders around Europe have done since the start of the sovereign debt crisis. But his mandate is far from convincing. He will be trying to form a minority government against Socialist rivals who have already explicitly said they cannot be relied upon to back his reform agenda. It does not augur well for political certainty in the country — not one minority administration has managed to go full term since the 1974 overthrow of dictator Antonio Salazar. Coalition negotiations are likely to start today; Passos Coelho has to reach an understanding that will allow the 2016 budget to pass in coming weeks.
If emerging markets are to lead global economic performance one again as they did in recent years, an important foundation will be to convince as many people as possible that reported growth data are as accurate as they can possibly be.