BOE gets vital economic healthcheck before August meet

Bloomberg

Bank of England (BOE) policy makers are getting a crucial glimpse of the health of the UK economy before their crunch August meeting.
A deluge of numbers on wages, inflation, retail sales and public borrowing are coming over the next five days. While a similar run of reports prompted the bank to back away from an interest-rate increase in May, this time appears different, with recent indicators looking more positive.

UK’s Big Week
A Bloomberg survey showed 71 percent of economists expect a rate hike on Aug. 2, up from 55 percent last month, while investors are currently pricing in about an 80 percent chance of such a move.
Bets on a hike have gathered momentum since the BOE’s June meeting, when Chief Economist Andy Haldane unexpectedly threw his support behind an immediate increase. They were further boosted when Governor Mark Carney said earlier this month that recent data had been encouraging, supporting the view that the economy will require higher interest rate.
Pricing for August is now at similar levels to that seen ahead of the bank’s May decision, before softer numbers and an intervention by Carney damped expectations. Officials ultimately voted to maintain rates at 0.5 percent.
The backdrop has improved since, with a GDP report confirming the bank’s view that the economy is gaining momentum after its snow-damaged first quarter, and evidence that better weather and
the World Cup had boosted consumer spending.
There was more positive news, with a report from Visa showing consumer spending climbed 0.7 percent in June from a year earlier — marking the first back-to-back monthly increase since spring 2017 — and a separate survey from Lloyds indicating business confidence has edged higher this year.

Tepid Growth
Still, economists in the Bloomberg survey see growth reaching just 1.3 percent this year, well below the rates expected for Germany and the euro area. In a report, ITEM Club said UK expansion this year will be ‘tepid.’
The wild card for the UK remains politics, as Prime Minister Theresa May strives to hold on to power after a few high-profile resignations over her Brexit plan.
“This month’s GDP supported the idea that the economy is recovering — not rebounding, but recovering — and that seems to be enough for a couple of MPC members,” Fabrice Montagne, chief UK economist at Barclays Plc. “And that’s enough to have a hike.”
Bloomberg’s latest survey showed economists have slightly reduced their expectations for growth for the rest of 2018, and see inflation continuing to ebb lower. Most expect a hike in August to be followed up by another move in the second quarter of 2019.