- UK wage inflation unlikely to follow CPI strength
- US housing industry optimistic for growth
- Yellen's comments interpreted as ''slightly hawkish'
Inflation, or the lack thereof, will be on today’s radar again with the release of the UK labour market report as the market focuses on wage growth after yesterday’s stronger-than-predicted gain in consumer prices for June. Later, a pair of US releases (industrial production the NAHB Housing Market Index) will influence the market’s interpretation of a second day Congressional testimony by Federal Reserve Bank chair Janet Yellen, who's scheduled to speak at 14:00 GMT.
UK: Labour Market Report (08:30 GMT) Yesterday’s news that consumer inflation in Britain is running a bit hotter than expected will focus attention on the pace of wage growth in today’s report on payrolls. Although the upside risk for inflation is still low, the latest figures suggest that expectations that pricing pressure will remain a non-issue is expecting too much. That’s certainly been clear in the house price data - house price inflation reached 10.5 percent in May, the fastest rate in four years, according to this week's numbers from the Office for National Statistics.
Wage inflation, by contrast, has been trending lower lately. Wages excluding bonuses grew 0.9 percent for the year to April (based on three-month averages). That’s the slowest rate since last November. Bad news for workers, but it’s one reason why the Bank of England may see the faster pace in consumer inflation as less than a clear signal for monetary tightening.
The outlook could change quickly if today’s labour market report for May shows that wage inflation turned sharply higher. But some economists think we’ll see the opposite: a slightly slower pace in the annual growth rate for wages. If so, the uptick in consumer inflation will look like an anomaly, at least for now. 
US: Industrial Production (13:15 GMT) The trend in industrial output has been improving this year. Production increased 4.3 percent in May against the corresponding period last year. That’s the fastest in nearly two years. Good news, of course, although good news in industrial activity today may leave Mr Market a bit anxious after yesterday’s comments from Yellen in her testimony to Congress.
“There's no formula and there's no mechanical answer that I can give you about when the first rate increase will occur,” she told lawmakers. “It will depend on the progress of our economy and how we assess it based on a variety of indicators.” Although Yellen left plenty of room for keeping policy accommodative for the near term, some analysts interpreted her remarks as leaning slightly more toward the hawkish view in terms of the timing on when to begin raising rates.
One telling observation by Yellen: “The economy is continuing to make progress toward the Federal Reserve's objectives of maximum employment and price stability.” Nonetheless, she reminded that “we need to be careful to make sure that the economy is on a solid trajectory before we consider raising interest rates”. Nonetheless, “What will actually happen clearly is going to depend on the progress the economy makes,” she added.
Today’s June update on industrial production will be front and center as Yellen continues with a second day of testimony. The crowd’s looking for a softer increase in output: 0.4 percent on a monthly basis, down from a 0.6 percent rise in the previous month. But a 0.4 percent advance for June will translate into a faster year-on-year rate: 4.5 percent. If the prediction’s correct, the market will be eager for additional clarity from Yellen on the outlook for the timing of the first rate hike. 
US: NAHB Housing Market Index (14:00 GMT) Housing has been a weak spot for the economy lately, although today’s survey data from the National Association of Home Builders (NAHB) is expected to show that a majority of executives in the industry are optimistic. If the prediction holds, this benchmark in today’s July release will rise above the neutral 50 mark for the first time since January.
The previous report already hinted at the possibility of a modest revival in housing’s fortunes. The June increase in the Housing Market Index to 49 marked a decent reversal from a winter slump that pushed this gauge to a 12-month low in May. “After several months of little fluctuation, a four-point uptick in builder sentiment is a welcome sign and shows some renewed confidence in the industry,” NAHB chairman Kevin Kelly noted in last month’s update.
There are still concerns about the housing market’s future, in part because of uncertainty linked to expectations that interest rates will be rising soon. But if expectations for a modest gain over 50 are realised in today’s release, confidence will get a boost that the housing sector can at least maintain a decent if unspectacular rate of growth once the monetary tightening begins anew.