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OPINION

Next week's economics: April 7 - 11

Next week's economics: April 7 - 11
April 3, 2014
Next week's economics: April 7 - 11

On Tuesday, UK industrial and manufacturing output could show small rises in February, which would put output on course to match Q4’s growth rate. This should be corroborated by NIESR's estimate of GDP later that day, which is likely to show that the economy grew by around 0.7 per cent in Q1, the same rate as in Q4.

The euro area should also see rising industrial output, with France and Germany posting small rises for February and Italy a small fall, albeit after a big rise in January. Overall, the picture should be that output in the region is on course for decent growth in the first quarter.

However, the euro area's recovery isn't helping UK net exports much. Although Wednesday's figures could show that the trade gap narrowed in February it is likely to be little different from Q4's deficit, implying that net trade didn't contribute to UK growth in the quarter.

This might increase concerns that the UK has lost export competitiveness. This is already a possibility for exports to non-EU countries - for example exports to the US have fallen in the past 12 months even though the economy there has grown - and it could be true for exports to the euro area too. This would imply that if the UK is to continue growing, it must borrow from overseas - which might not be sustainable.

The main US figures next week will be Tuesday’s job openings numbers. These should show small increases in job vacancies and new hires, consistent with steady growth.

However, they will also show that the vacancy rate and the job separation rates are well below their pre-crisis rates, suggesting that job creation and destruction have both shifted downwards.

This is worrying because a lot of productivity growth comes not from existing firms becoming more efficient but from creative destruction - from more productive firms entering the market and less efficient ones being destroyed. Lower rates of job creation and destruction are a sign of less creative destruction, which implies slower trend productivity growth. This matters for investors, because productivity growth is often associated with greater optimism about future growth and hence with higher equity valuations.