Poll: China 2016 economic growth seen slowing to 6.5 percent despite policy support

By Elias Glenn

BEIJING (Reuters) - China's economic growth is expected to cool to 6.5 percent this year - the low end of Beijing's target range - even as the government steps up spending and the central bank loosens policy further to prevent a sharper slowdown, a Reuters poll showed.

Persistent pressure on the world's second-largest economy due to weak exports and massive industrial overcapacity are raising the stakes for policymakers keen on ensuring job growth while avoiding more serious fallout from China's mounting debt.

"The economy still faces structural problems such as oversupply of real estate and overcapacity. Any policy stimulus on investment would not be indefinite and economic growth will eventually resume its downtrend," Nomura economists said in a recent research note.

The median forecast in a Reuters survey of 60 economists taken in the past week is for 6.5 percent growth in 2016 - the weakest in a quarter of a century - with a further slowing to 6.3 percent in 2017 as a housing recovery that supported growth earlier this year loses momentum.

The forecasts are unchanged from an April poll.

The survey's highest GDP forecast was 6.8 percent for this year and the lowest was 6.0 percent.

The government has set a growth target of 6.5-7 percent for this year. The economy expanded 6.9 percent in 2015.

The National Bureau of Statistics said last week that China's economy expanded 6.7 percent in the second quarter, slightly faster than expected and unchanged from the first quarter of the year.

While fears of a hard landing in China have eased, growth in private sector investment is at a record low, leaving the economy more dependant on government support. Concerns are increasing that more state-led growth risks a "vicious cycle" of declining efficiency and lower growth potential.

The property sector, which has given China's economy a welcome boost in recent months by spurring demand for products from cement to steel, showed signs of fatigue in June, with real estate investment growth cooling for a second month.

Home price gains slowed in many cities in June, adding to expectations that the current housing cycle may be peaking.

The central bank has held off on cutting interest rates since October, with a government newspaper quoting an "authoritative source" in May as saying the country could suffer a financial crisis and recession if the government relies too much on debt-fuelled stimulus.

But economists believe a further slowdown could lead the People's Bank of China (PBOC) to cut the benchmark interest rate by another 25 basis points (bps) by the first quarter of 2017.

They also expected the PBOC will lower the amount of cash that banks are required to hold as reserves (RRR) by another 75 bps by the end of 2016.

Economists polled in April had expected a 25 bps rate cut and a total of 150 bps of RRR cuts this year.

China's central bank has cut lending rates six times since November 2014 to 4.35 percent, and lowered the amount of cash that banks are required to hold as reserves to 17 percent.

Analysts also expect annual inflation to average 2 percent in 2016 and 2017, underscoring the sluggish growth outlook. Inflation was 1.9 percent in the first half of 2016.

(For other stories from the Reuters global economic polls:)

Column: Among active managers patience is the principal virtue - James Saft

By James Saft

(Reuters) - If you are going to use active investment managers you may want to limit yourself to those who are both truly active and, crucially, unusually patient.

A recent study shows that funds which deviate substantially from the indices they track and which have average holding periods of more than two years perform exceptionally well, outperforming, on average, by two percentage points per year.

What’s more, that subset of actively managed portfolios was the only one to so outperform, according to the study, by Martijn Cremers of the University of Notre Dame and Ankur Pareek of Rutgers Business School.

The important distinctions here are two; how high is the “active share” of a portfolio and how long does it tend to hold its investments. Active share is a concept invented by Cremers and colleagues which measures the actual deviation a given portfolio takes from the holdings of its base index. This allows us to sort the “closet indexers” from the real active fund managers. Closet indexing is both quite widespread, due to managers wanting to minimize their own career risk, and a bit of a rip-off, as you pay for active but get something pretty close to an index fund.

The study looked at mutual funds and institutional portfolios and sorted them by both active share and average holding period.

So while frequent trading in the study was linked to underperformance, simply holding investments for longer did not lead to better performance unless it was by the sub-set of portfolios which were also taking big bets against the index.

“Our results suggest that U.S. equity markets provide opportunities for longer-term active managers, perhaps because of the limited arbitrage capital devoted to patient and active investment strategies," Cremers and Pareek write. (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2498743)

Why? Hard to know for certain, but it seems that arbitrage opportunities may be thrown up by the huge numbers of closet indexers who self-servingly hew to their benchmarks while trading relatively often.

“The literature on limited arbitrage has argued that trading on long-term mispricing is more expensive and difficult, especially if the fund manager risks being fired in the short term before ex-post successful long-term bets pay off. In equilibrium, that could allow relatively more long-term mispricing and thus greater profitability for the more limited arbitrage capital that is pursuing patient active strategies.”

In other words, in a rather fundamental way, patient but active investors are making money because other fund managers are afraid to get fired.

PATIENCE IS A VIRTUE, BUT WITH HIGH UPFRONT COSTS

All of this accords well with remarks at a CFA Institute conference this week by noted value investor Leah Joy Zell who said that taking profits from good investments too soon was often a source of regret.

This makes sense. It is expensive, for a value investor like Zell, to find and research companies, taking a large upfront investment in time and energy. Simply selling one of these on after 18 months and a 60 or even 90 percent return may not fit well with the investment or business model of a bottom-up value-oriented firm.

Covering more than 20 years, the median holding period among mutual funds ranged as low as 0.9 year in the bubble year of 1999, eventually climbing to 1.7 years. This indicates that recent trends towards higher stock trading and shorter holding periods are probably down to program and algo traders, as opposed to mutual funds. Longer holding periods were “unconditionally” associated with better results, the study found, regardless of active share. Yet the only funds to show statistically significant outperformance combined high active share with long holding periods.

Those funds which did outperform used familiar strategies but stuck with the stock bets these strategies threw up.

“Their outperformance can largely be explained by their focus on stocks that other investors shun or find less attractive: picking safe (low beta), value (high book-to-market) and high quality (profitable, with growing profit margins, less uncertainty, higher payout) stocks and then sticking with those over relatively long periods until their apparent undervaluation has been reversed.”

For investors seeking managers, this data will place new importance on fund selection. To enjoy these benefits investors are going to have to be willing to suffer potentially long periods of outperformance and big deviations from what the rest of the market is doing. Chopping and changing because your manager has done poorly over a year or two is not likely to yield good benefits.

Find someone who has shown skill, makes conviction bets and sticks with them. Then stick with her.

(James Saft is a Reuters columnist. The opinions expressed are his own)

High noon for regulators in China's Wild West bond market

By Nathaniel Taplin and Samuel Shen

SHANGHAI (Reuters) - A dispute between investors and the underwriter of a bond issued by Evergreen Industries is showing up regulatory failings that need fixing if China is to sustain newly robust inflows of foreign capital into local bonds.

As China's economy slows and its currency weakens under pressure from domestic capital flight, policymakers have opened up the country's corporate bond markets to foreign investors to help keep credit flowing.

Foreign holdings of onshore Chinese bonds rose by a record 40.9 billion yuan ($6.12 billion) in June, data from China's main bond clearinghouse show, surpassing the flow into bonds from commercial bank wealth management products for the first time since the height of the equity bubble in May 2015.

Foreigners still own less than 2 percent of China's bond market, but these rising flows could stall if investors, already nervous about yuan depreciation, fear unruly defaults.

In the past, failing firms were nearly always bailed out, usually with the assistance of local governments, so bondholders got their money in the end.

But with over 20 defaults so far in 2016, it is a much more dangerous market, and insiders say China's regulatory structure has failed to keep up.

Holders of the Evergreen Industries Holding Group Ltd bond, now in default, claim that underwriter Industrial and Commercial Bank of China (ICBC) <601398.SS> shirked due diligence and disclosure requirements, and ignored the conflict of interests inherent in its own separate loan to Evergreen.

Evergreen bondholders are taking their concerns directly to regulators, who have participated in meetings between the bondholders and ICBC, setting up the conflict as a potential test case on China's underwriting laws.

ICBC declined to comment, but an official involved with the case said current rules, which require underwriters to "urge" issuers to disclose problems as they arise and protect bondholders' interests, were manifestly unclear.

"Whether we have fulfilled our responsibilities to 'urge' them, you need a judge to decide that," the employee added.

China's bond markets are overseen by three different regulators, all with different rules, many of which have yet to be tested in court. And penalties for malfeasance are low in the interbank markets, where most bonds trade.

"In the interbank market, the penalty is often just several hundred thousand yuan of fines, and some oral reprimand," said an Evergreen investor.

WILD WEST

Insiders say rapid market growth - total bond debt in China is up over 50 percent in the past 18 months to 57 trillion yuan, equal to around 80 percent of GDP - has created a "Wild West" atmosphere where underwriters and rating agencies operate with little accountability and issuers pick the market where the rules suit them best.

In January, Reuters reported that newly liberalized issuance rules had resulted in a flood of high-yielding private placement bonds onto the Shanghai exchange, undermining government efforts to police risks in other areas, such as shadow banking.

"(Underwriters) can take advantage of the vague rules and regulations, and choose to interpret to their advantage and skirt responsibilities," says an Evergreen bondholder. "If it goes on like this, who will dare to invest? How can the bond market be prosperous?"

Evergreen bondholders are pursuing their case with the National Association of Financial Markets Institutional Investors (NAFMII), which regulates commercial paper like the Evergreen issue.

ICBC and the bondholders met as recently as this week, but have still not resolved their dispute.

NAFMII did not return requests for comment.

Market insiders say potential conflicts of interest, where underwriting banks hold information on issuers they can use to protect their loans ahead of bondholders' interests, are common. Evergreen bondholders say ICBC has declined to say if its loan to Evergreen was repaid.

"When the regulators designed the system, they didn't realize there might be a conflict of interest between banks' own loan books and their underwriting business," said a Hong Kong-based employee at an international ratings agency, who regularly meets with both underwriters and issuers on the mainland.

Nonetheless, with defaults accelerating and many more cases like Evergreen's expected, policymakers are becoming more active.

On June 21, NAFMII suspended Chinese accountants Ruihua for one year for irregularities related to the January default of logistics firm Yunfeng. And a week later the People's Bank of China, which declined comment for this article, said it would support investors' efforts to hold financial intermediaries legally accountable for lapses.

Investors say they want a much stronger, clearer and court-tested regulatory framework before they widen their exposure to Chinese corporates.

Jie Peng at Western Asset Management in Singapore, which invests in Chinese debt, said for now she was limiting investment to AAA-rated credit and top-tier state-owned enterprises.

"The legal system will definitely become a concern if we move down the credit curve," she said.

BOJ could wipe out bets on July easing

By Leika Kihara and Lisa Twaronite

TOKYO (Reuters) - Investors betting the Bank of Japan will ease monetary policy next week could be riding for a fall, as the yen's recent weakening and a government spending package take some pressure off the bank to step up its massive stimulus program.

Market speculation of further easing spiked last week after visiting former Federal Reserve Chairman Ben Bernanke told Prime Minister Shinzo Abe that there were still "various tools available" for monetary policy to spur growth.

A Reuters poll showed 85 percent of analysts expect the BOJ to ease on July 29, alongside the fiscal spending boost Abe is set to announce this month.

The BOJ has already implemented negative interest rates and is printing 80 trillion yen ($750 billion) a year to stimulate inflation after decades of deflation and stagnant growth, yet inflationary expectations appear to be weakening.

Sources familiar with the BOJ say it will downgrade its assessment that underlying trend inflation is "improving steadily" next week.

But there is no consensus within the bank on whether that warrants prompt action.

While officials do not rule out more stimulus in July, some say a delay in hitting the bank's inflation target alone shouldn't trigger immediate easing as a tightening job market will eventually push up wages and feed into prices.

"It's true underlying trend inflation lacks momentum. But what's important is for there to be signs that inflation expectations will heighten in the future," said one of the sources.

MARKET BACKLASH

The BOJ has stood pat since it adopted negative interest rates in January, with Governor Haruhiko Kuroda blaming weak inflation on temporary factors like oil price falls.

But sliding import costs from a strong yen and weak consumption have led many analysts to predict the BOJ will sharply cut its price forecasts, push back the two-year timeframe for hitting its price target and ease more.

September 10-year government bond futures <2JGBv1> rose to a record high and the iShares MSCI Japan ETF index (P:EWJ) hit a five-week high this month on expectations of a July easing.

"If the BOJ postpones the deadline again, it would exceed Kuroda's term (as governor in April 2018). Many people think that doing nothing under such conditions would be unacceptable," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance in Tokyo.

Some also think Kuroda will ease this month in step with Abe's pledged spending plan, but given calls by Group of 20 nations for members to avoid relying excessively on monetary policy to spur growth, the BOJ might sit this dance out.

Indeed sources have told Reuters the bank will factor in the government's spending package in producing new projections this month, which could help minimize cuts to its inflation forecasts and reduce the pressure for easing.

Kuroda may also see less need to act, now shares have risen and the yen has eased to 106 per dollar since spiking below 100 when Britain's vote to leave the European Union unsettled global markets last month.

But the bank risks triggering a market backlash if it fails to meet investors' expectations for easing.

"In the case of a 'do-nothing' surprise, you have to look at the technicals of dollar/yen. We could see a pretty sharp move lower," said Mitul Kotecha, head of FX strategy at Asia-Pacific for Barclays (LON:BARC) in Singapore.

"We were around 100 (yen to the dollar) not too long ago, earlier in the month, and I think anything towards that level wouldn't be surprising, if we see no action."

A Citi survey of its clients and financial institutions showed 80 percent expected the dollar to fall more than 3 percent against the yen if the BOJ stands pat and does not signal action in September. More than 30 percent think the drop will be more than 4 percent.

But that might not be enough to persuade BOJ officials.

"The BOJ won't ease just because markets have factored in action," said one of the sources. "That's not monetary policy."

Oil Search bows to ExxonMobil in battle for InterOil

MELBOURNE (Reuters) - Australia's Oil Search Ltd has cleared the way for ExxonMobil (NYSE:XOM) Corp to take over InterOil Corp for $2.2 billion, giving the U.S. giant access to a rich new gas field to expand its exports from Papua New Guinea.

The move could lead ExxonMobil and French giant Total SA (PA:TOTF) to tie together their competing gas interests in the South Pacific nation, cooperating to reduce costs as they battle cheap oil and liquefied natural gas (LNG) prices.

Oil Search, backed by Total, had also bid for InterOil, but said on Thursday it would not raise its offer. The two companies agreed that letting ExxonMobil take over InterOil, which owns a 36.5 percent stake in the Elk-Antelope gas field, would help speed up development of the discovery, it said.

The majors are targeting Papua New Guinea for growth as the quality of its gas, low costs and proximity to Asia's big liquefied natural gas (LNG) consumers make it one of the most attractive places to develop projects following a collapse in oil and gas prices.

Total had envisioned building a new $10 billion LNG project, but said it was now committed to working with ExxonMobil's PNG LNG, which could use Elk-Antelope gas to feed an expansion.

"This scenario would be the lowest cost viable supply in the Pacific Basin," said Saul Kavonic, an analyst at consultants Wood Mackenzie.

Oil Search, a partner in both PNG LNG plant and Papua LNG, estimates that around $2 billion could be saved by tying the two projects together.

"For Oil Search shareholders, the successful takeover of InterOil by ExxonMobil will deliver a major part of our original objectives in the acquisition of InterOil and our agreement with Total SA, without shareholder dilution and any acquisition risk," Oil Search Managing Director Peter Botten said in a statement.

Total, operator of the Elk-Antelope fields, said late on Wednesday it was committed to cooperating with the PNG LNG project to maximize the value of the gas.

"It's going to come down to how you carve up that value pie. Those are the negotiations that will have to take place in order for that joint development to occur," said Kavonic.

Oil Search and Total highlighted a recent certification of the gas field's reserves at less than 6.5 trillion cubic feet, compared to InterOil's dream of 10 tcf, as a factor in their analysis of the best development option for Elk-Antelope.

ExxonMobil declined to comment.

ExxonMobil has offered $45 worth of its shares plus $7.07 per share for each trillion cubic feet equivalent (tcfe) above 6.2 tcfe up to a maximum of 10 tcfe for each InterOil share. InterOil last traded at $48.95.

Asian shares gain in morning trade, Tokyo up solidly on weaker yen

Investing.com - Shares in Tokyo gained smartly, aided by a weaker yen with other key markets up narrowly ahead of the European Central Bank policy review later Thursday.

The Nikkei 225 rose 1.02% with the yen crossing 107 to the dollar. Elsewhere, theShanghai Composite edged up 0.13%, while the S&P/ASX 200 gained 0.60%.

In Australia, the NAB quarterly business confidence survey came in at plus-2 in the second quarter, compared to a first quarter figure of plus-4. The quarterly business outlook is dated, but is a good sector indicator.

Overnight, U.S. stocks rose moderately on Wednesday, as theDow Jones Industrial Average closed higher for a ninth consecutive session matching its longest winning streak since March, 2013.

Buoyed by stellar gains from Microsoft Corporation (NASDAQ:NASDAQ:MSFT), the Dow also hit all-time record high of 18,622.01, posting a record intra-day high for the eighth time in nine sessions. The Dow closed at 18,595.03%, up 36.02 or 0.19%, also recording a record closing-high for the ninth consecutive trading day.

The NASDAQ Composite index added 53.56 or 1.06% to 5,089.93, while the S&P 500Composite index gained 9.24 or 0.43% to 2,173.02. Much like the Dow, the S&P 500 also hit record intra-session and closing highs on Wednesday. On the S&P 500, six of 10 sectors closed in the green as stocks in the Technology and Health Care industries led.

Stocks in the Utilities sector lagged, closing down by 0.46% on the session. Meanwhile, the NASDAQ remains approximately approximately 2.5% from all-time record highs, after rallying from a subdued performance this spring.

Asian shares at nine-month highs on inflow bets; dollar strong

By Saikat Chatterjee

HONG KONG (Reuters) - Asian stocks climbed to nine-month highs on Thursday, helped by a pickup in capital inflows and a recovery in global oil prices, while the dollar stood strong on growing bets of a U.S. rate increase as early as September.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) was up 0.3 percent, its highest level since October 2015 after earnings overnight helped push both the Dow Jones industrial average (DJI) and the S&P 500 (SPX) to record highs. It has gained 10 percent over the last month.

"Investors are optimistic on the outlook for Asian equities compared to developed markets and despite the looming geopolitical uncertainty so we are advising clients to buy on dips," said a markets strategist at a U.S. bank in Hong Kong.

Portfolio inflows to emerging market assets rose to the highest level in nearly three years last week, according to the latest survey by the Institute of International Finance.

Tempering risk appetite, however, was Turkish President Tayyip Erdogan who declared a state of emergency on Wednesday as he widened a crackdown against thousands of members of the security forces, judiciary, civil service and academia after a failed coup.

Bond and stock markets in Malaysia were relatively unruffled after news that the U.S. Justice Department filed lawsuits linked to scandal-ridden state fund 1MDB with the currency hugging well worn ranges.

Leading regional gainers was Japan's Nikkei stock index (N225) which rose 1 percent, aided by the tailwind of a weaker currency.

In currency markets, the greenback got a boost after influential Fed-watcher Jon Hilsenrath reported that U.S. officials are gaining confidence they can increase interest rates as early as September.

The dollar rose 0.2 percent to 107.08 yen after rising as high as 107.460 earlier, its highest since June 7 and returning to levels seen before markets were roiled by Britain's vote last month to exit the European Union.

The dollar index, which tracks the greenback against a basket of six rival currencies, hit a peak of 97.323 (DXY) on Wednesday, its highest level since March 10. It was last at 97.06, broadly steady.

The euro was flat on the day at $1.1021 after notching a near one-month low of $1.0980 overnight.

The European Central Bank will meet later in the session, and is expected to hold policy steady while perhaps addressing a scarcity of bonds for its 1.7 trillion euro stimulus program.

"The weakness of the euro provides automatic stimulus to the economy, which means the ECB can afford to wait," wrote Kathy Lien, managing director of FX strategy for BK Asset Management.

"So the potential for an initial short squeeze is high if the central bank stands pat and the outlook thereafter will depend on how strong of a message the ECB sends," she said.

Looking ahead, financial leaders from the world's biggest economies will meet in China this weekend, with Brexit fallout and dwindling policy options to boost global growth expected to dominate talks.

Crude oil extended gains in the Asian session. Brent crude (LCOc1) was slightly higher in Asian trading at $47.35 a barrel, after settling up 1 percent, while U.S. crude (CLc1) edged 0.2 percent higher at $45.86 after adding 0.7 percent overnight. Spot gold edged down 0.1 percent to $1,314.08 an ounce after plumbing three-week lows on Wednesday.

Poll: Australia growth upgraded, but deflation still a danger

By Wayne Cole

SYDNEY (Reuters) - Australia's economy should handily outpace much of the rich world this year and next, yet the country might still skirt dangerously close to deflation as wages and prices grow at the slowest pace on record.

At first glance, all is well. The latest Reuters poll found analysts expect Australia's A$1.6 trillion ($1.2 trillion) of gross domestic product (GDP) to expand by 2.9 percent this year, up from 2.6 percent in the April poll.

Growth for 2017 was seen just a whisker lower at 2.8 percent, an impressive feat for a nation that has not suffered a recession since 1991.

The poll upgrade owed much to a strong performance in the first quarter when booming export volumes helped lift annual growth to a surprisingly rapid 3.1 percent.

A decade of massive mining investment has allowed Australia to ship more of everything from iron ore to gold, with China proving a willing buyer despite its apparent slowdown.

Yet the surge in supply has depressed commodity prices, eating into export earnings, profits, wages and tax revenues.

Measures of national income actually fell in the year to March while GDP in current dollars rose at an historically anemic 2.1 percent.

Wage growth has braked hard to its slowest on record, crimping household spending power and contributing to a worrying decline in inflation.

"Tradables inflation continues to be suppressed by intense competitive pressures and price pressures remain muted across a wide range of items," said ANZ senior economist Jo Masters.

"Moreover, both wages and inflation pressures remain weak globally, even in those economies that are at, or close to, full employment."

Consumer price figures (CPI) for the second quarter due on July 27 are expected to show underlying inflation at an all-time low of around 1.2 percent, well beneath the Reserve Bank of Australia's (RBA) long run target band of 2 to 3 percent.

Such an outcome could well force the RBA to cut interest rates to an historic low of 1.5 percent in the third quarter of this year.

Analysts have responded by slashing their forecast for CPI inflation to just 1.3 percent for 2016, down from 1.9 percent in the previous poll and another historically weak result.

Still, they seem optimistic that the country will dodge full-scale deflation, with CPI inflation expected to pick up to 2.2 percent next year.

Indeed, none of the 30 economists predicted a negative reading for the CPI, with the lowest forecast being 1.1 percent for this year and 1.7 percent in 2017.

Forex - Kiwi holds weaker after RBNZ views, yen, Aussie also down

Investing.com - The Aussie ticked lower in Asia on Thursday after a disappointing business confidence survey while the Kiwi remained weak after the latest economic assessment from the central bank saw room to ease further and called for a weaker exchange rate.

NZD/USD traded at 0.6977, down 0.64%. Elsewhere, USD/JPY changed hands at 107.30, up 0.39%, while AUD/USD traded at 0.7472, down 0.01%. GBP/USD traded at 1.3230, up 0.19%.

In Australia, the NAB quarterly business confidence survey came in at plus-2 in the second quarter, compared to a first quarter figure of plus-4. The quarterly business outlook is dated, but is a good sector indicator.

Earlier, the Reserve Bank of New Zealand on Thursday suggested the more easing is possible from an overnight cash rate of 2.25% with a weaker Kiwi an aim of policy and downside risks for global growth a worry.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last quoted at 97.16.

Overnight, the dollar continued to hover near four-month highs against the other major currencies on Wednesday, as global growth concerns still weighed on market sentiment and as trading volumes were expected to remain light with no major U.S. data due throughout the day.

Investors remained cautious after the International Monetary Fund on Tuesday downwardly revised its projection for global economic growth in 2016 to 3.1%, from the prior 3.2%, though expecting a rebound to 3.4% in 2017.

The IMF cut the U.S. growth forecast to 2.2% from 2.4%, but said the Brexit impact on the U.S. economy would be muted and explained that the reduction was due to weaker than expected first quarter gross domestic product.

In addition, the IMF cut its U.K. growth forecast to 1.7% from the prior 1.9% for this year and slashing 2017 growth to 1.3% from April’s estimate of 2.2% due to the Brexit.
GBP/USD climbed 0.53% to 1.3182, off the one-week low of 1.3064 hit overnight.

The pound found support however after the U.K. Office for National Statistics said on Wednesday that the unemployment rate fell to 4.9% in the three months to May from April’s reading of 5.0%, compared to expectations for an unchanged reading.

The claimant count rose by 400 in June, compared to expectations for a increase of 3,500 people, and following an advance of 12,200 a month earlier.

Meanwhile, the average earnings index, including bonuses, rose by 2.3% in the three months to May, in line with forecasts and after increasing by 2.0% in the three months to April.

Excluding bonuses, wages rose by 2.2%, below forecasts for a 2.3% increase and following a 2.2% increase in the three months to April.