RBA Governor Philip Lowe delivered a speech titled “Productivity, Wages and Prosperity” today. There he pointed out that “over the past couple of years, output growth has been subdued, but employment growth has been strong.” And, it’s productivity that’s holding the economy back. Low pointed to strong employment growth in household services, but output per hour worked was only 4% higher than it was in 2010. In contrast, the output per hour worked was up 13% to 16% in other industry groups.
He urged “strong ongoing focus on training, education and the accumulation of human capital” to bring up the overall productivity. And he emphasized that “our national comparative advantage will increasingly be built on the quality of our ideas and our human capital.”
Regarding monetary policy, Lowe said the economy is “moving in the right direction” and the next move in interest rate will be “up, not down”. But, “the environment in which interest rates are increasing is also likely to be one in which people’s incomes are growing more quickly than they are now.”And, “any increase in interest rates, however, still looks to be some time away.”
Pound dips as UK CPI unchanged at 2.4% yoy, GBP/USD heads to 1.3203
Sterling dips notably as UK consumer inflation data missed expectation.
Headline CPI was unchanged at 2.4% yoy in May, below consensus of 2.5% yoy. Core CPI was also unchanged at 2.1% yoy, met expectations. RPI dropped to 3.3% yoy, down from 3.4% yoy and missed expectation of 3.4% yoy.
PPI input was at 2.8% mom, 9.2% yoy, versus expectation f of 1.7% mom, 7.0% yoy, and prior 0.6% mom, 5.6% yoy/
PPI output was at 0.4% mom, 2.9% yoy, versus expectation of 0.3% mom, 2.9% yoy, and prior 0.4% mom, 2.5% yoy.
PPI output core was at 0.2% mom, 2.1% yoy, versus expectation of 0.1% mom, 2.2% yoy, and prior 0.2% mom, 2.0% yoy.
UK House price index rose 3.9% yoy in April, below expectation of 4.4% yoy.
Also released in European session, Eurozone industrial production dropped -0.9% mom in April versus expectation of -0.5% mom. Eurozone employment rose 0.4% in Q1 versus expectation of 0.3% qoq.
Swiss PPI rose 0.2% mom, 3.2% yoy in May versus expectation of 0.2% mom, 3.2% yoy.
GBP/USD’s break of 1.3341 minor support should now confirm the completion of rebound from 1.3203. Deeper fall is expected to retest 1.3203 soon.