Previewing UK Jobs & GDP Releases

The mini-budget has sharpened concerns about what might become of the UK economy, but an avalanche of data this week will give some insight into what is happening now.
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Unemployment figures

The UK September Claimant Count change is forecast to come in +10K compared to 6.3K prior, in a somewhat modest increase compared to what many expect could result from the tax cuts. Pending the release of the details almost two months from now, the assumption is that there will be significant cuts in other areas of government spending to finance the budget. The increased spending is expected to prompt the BoE to continue raising rates to offset the inflationary impacts, but the budget details won't be released before the next MPC meeting.

The monthly employment change forecast might raise some eyebrows being forecast at -127K compared to +40K in the last reading. But, this is due to the extraordinarily high figure from April rolling off. The August unemployment rate is expected to remain unchanged at 3.6%

Monthly GDP

Q2 GDP was revised to +0.2% from the flash reading of -0.1%. With the BOE having predicted an imminent recession, the revision out of negative was seen as a positive surprise. But it didn't buoy sentiment all that much since now the focus is on whether Q3 will be negative, considering that the prior quarter was just barely positive.

August monthly GDP is expected at -0.1% compared to +0.2% in July. That would put the rolling three-month average for August at -0.2%. That would imply that September would have to show at least +0.4% growth for the quarter to remain positive. With the distress around the mini-budget potentially weighing on sentiment in the latter part of the month, that is a bit of an ask.

UK 100 risks short-term breakdown

The UK 100 index is trading below the 200 and 50-day averages in a bearish move that began with the retest of 7585. The broader uptrend broke down earlier in June, but the support-to-resistance flip at 7000 confirms a shorter-term trend to the downside, despite the CCI bullish divergence.

Below the 7000 handle, the index could extend its losses down to the base channel connecting the tops and 6765. If that breaks, it opens the door to the 50% Fibonacci retracement at 6230.

However, if the 7000 round level holds firm, the 50-day average lies at 7240, below the 200 equivalent near 7340.

Key takeaways

The budget details will not be out before the next MPC, leaving investors focused on employment, which for now is steady.

The BOE revised UK's Q2 GDP up to 0.2% from a recessionary low, so investors will be keen to see where the Q3 GDP ends too. Economists are still concerned that it could be negative in light of the mini-budget being announced at the end of September.