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Wage growth could be trigger point for Bank of England interest rate hike in May

Day ahead includes the latest UK employment and average earnings data, plus trading updates from Primark owner Associated British Foods and fellow retailer JD Sports
Economists at ING are forecasting UK regular pay growth to edge up to 2.8% year-on-year

Investors will be closely eyeing the first of a key batch of UK economic data on Tuesday, with UK unemployment and average earnings numbers due to be revealed a day ahead of the latest inflation figures.

A further acceleration in wage growth could be enough to cement expectations for a May rate hike from the Bank of England, especially if the consumer price index continues to reverse.

Policymakers expect wages to rocket this year given the tight jobs market, with a further acceleration expected in the latest data. Economists at ING are forecasting UK regular pay growth to edge up to 2.8% year-on-year.

In a preview, ING pointed out that, admittedly, the numbers are being flattered by a weak patch this time last year, but so far the data received since November does suggest pay pressures are building, as skills shortages intensify in certain sectors.

They added that it is also fair to say the jobs numbers have been all over the place recently, although a surprisingly strong reading last month helped eased some of the uncertainty.

The ING economists feel the consensus for an increase in employment of 55,000 looks a little low, and they favour a reading of around 80,000-90,000.

High street focus

On the corporate front, the health of UK retailers will be high on the agenda on Tuesday, with trading updates due from JD Sports Fashion PLC (LON:JD.), and Primark owner Associated British Food PLC (LON:ABF).

Discount clothing stores chain Primark has established itself as food to retail conglomerate AB Foods most important division in recent years.

Primark already contributes more than half of AB Foods profits, and that could grow even further if it successfully expands into Europe and the US. Given its MVP status, the value fashion retailer will almost certainly take centre stage once again when AB Foods publishes its interim numbers on Tuesday.

Back in November’ full-year results, Primark posted a 12% rise in revenues, and with shares trading at a premium to most other UK retailers, investors will be looking for similar growth once again.

As for the FTSE 100-listed firm’s sugar division, the company has previously flagged the impact of lower EU sugar prices, but investors will be hoping a recent profit warning from German sugar producer Südzucker is just a one-off and not an industry-wide issue.

JD Sports to take the tape

Elsewhere on the high street, after a bullish update and forecast upgrade back in January, investors already have a fairly good idea of what to expect from JD Sports’ full-year results.

Back in that statement, the sportswear and athleisure retailer said it expected profit before tax to top £300mln, with sales also set to jump despite “challenging comparatives”.

A couple of weeks ago JD unveiled the £400mln acquisition of US peer The Finish Line, so more detail on the plans for that business will be keenly eyed now it is officially part of the group.

Significant events expected on Tuesday April 17:

Trading update: Rio Tinto PLC (Q1) (LON:RIO), Ashmore group PLC (LON:ASHM), Porvair PLC (LON:PRV)

Interims: Associated British Foods plc (LON:ABF), APC Technology Group PLC (LON:APC), Egdon Resources Plc (LON:EDR)

Finals: AA plc (LON:AA.), AFI Development PLC (LON:AFRB), Clearstar Inc (LON:CLSU), Christie Group plc (LON:CTG), Flowtech Fluidpower PLC (LON:FLO), Filta Group Holdings PLC (LON:FLTA), Highland Gold mining Limited (LON:HGM), JD Sports Fashion PLC (LON:JD.), Mi-Pay Group PLC (LON:MPAY), TP Group PLC (LON:TPG)

Economic data: UK unemployment; UK average earnings; German ZEW survey; US housing starts; US industrial production

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