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OPINION

Next week's economics: 10-14 Dec

Next week's economics: 10-14 Dec
December 7, 2012
Next week's economics: 10-14 Dec

Flash purchasing managers surveys on Friday are likely to show that euro area output fell this month in both manufacturing and services; the best we can hope for is that the pace of contraction is slightly less than last month. Official numbers are likely to confirm this. Although Monday's data from France and Italy could show rising industrial production in October, these would merely be bounces after huge falls in September. The trend in output is likely to be downwards. And there's not much hope of a swift turnaround. Tuesday's ZEW survey, a poll of German finance professionals, is expected to show that the economy is expected to falter in the next six months.

Elsewhere, however, things might be brighter. In China, purchasing managers should confirm that output is now picking up after a year-long stagnation. And there should be signs of growth in the US too.

These figures will be complicated by the effect of Hurricane Sandy, which depressed industrial production and retail sales early in November. However, retail sales seem to have been strong since then, and official figures are expected to show a small rise in November relative to October. This would leave sales in October-November well up on the third-quarter's level. Industrial production, however, might not have fared quite so well, as power cuts in some areas continued for several days after Sandy struck, thus depressing utilities output - although manufacturing should stage a better recovery in the month. Overall, though, the numbers could show that we're on course for little growth in production in the fourth quarter relative to the third quarter.

In the UK, the main news should be another fall in unemployment - possibly to below 2.5m. Many economists, however, are sceptical about this. Companies have been hanging onto staff in the hope of an upturn, which means there's widespread on-the-job under-employment. This is one reason why falling unemployment has not led to significant wage inflation; next week's figures are likely to show this below 2 per cent, less than it was last year. It's also a reason to fear that unemployment won't continue to fall; if the economy picks up next year as expected, companies might work their existing staff harder rather than hire new workers.

On Wednesday, we'll get the Fed's latest monetary policy announcement. This should confirm that the fed funds rate will stay low for a long time, and that quantitative easing will continue. The Fed is also expected to forecast slow growth and low inflation for next year.