The Monday note - 20 March 2017

• The FTSE 100 closed on Friday at 7,425.0, up 82 points on a week earlier, as investors viewed the US rate rise as proof that the global economy is strengthening. Ten year Gilt yields remained stable at 1.25%
• The G20 finance ministers’ meeting did not issue a statement of support for free trade, under pressure from the US. The communique from last year’s meeting promised to “resist all forms of protectionism”
• US semi-conductor giant, Intel, acquired driver assistance technology company, Mobileye, for $15.3 billion. The move is intended to help the firm transition away from the PC market
• UK unemployment edged lower to 4.7% in January, down from 4.8% in December and 5.1% a year ago. However, average pay rises fell below the rate of inflation to 1.7%

Chief Economist comments: 

The robust growth for the UK economy of late owes much to consumer spending. That pay growth has fallen below the rate of inflation is therefore a concern. However, a consumer squeeze takes time to bite – no one says, “my costs are rising 0.1% faster than my income this month, so it’s time to cut back”. Inflation will rise further in the near-term, yet by the autumn the impact of the oil price recovery and sterling’s devaluation will drop out of the figures. The current burst of inflation should lose momentum later this year, and low unemployment will eventually drive up wages.