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OPINION

Next week's economics: June 9 - 13

Next week's economics: June 9 - 13
June 5, 2014
Next week's economics: June 9 - 13

On Tuesday, official data should show that manufacturing output grew again in April. Although the increase is likely to be small, it will follow some big gains in February and March, which would be consistent with the economy posting good growth in the second quarter relative to the first.

This should be confirmed by the NIESR’s estimate of GDP in May. It should show growth of close to 1 per cent in the last three months compared to the previous three.

Such good growth is generating jobs. Wednesday’s figures should post another drop in unemployment, to under 2.2m. However, from one perspective there are too many jobs being created. Last month's numbers showed that total hours worked in the economy rose by 0.9 per cent in Q1, implying zero productivity growth. A repeat of that would add to fears that the financial crisis greatly reduced the economy’s potential productivity growth. This would set the Bank of England worrying about possible inflation, and would reduce expectations for long-term GDP growth.

However, the drop in unemployment is generating only slight wage pressures. Wednesday's figures should show wage inflation of around 1.7 per cent. Although this is markedly up from the 0.8 per cent recorded in September, it would still imply a slight drop in real wages over the last 12 months.

It is in this light that we should read Tuesday’s report from the BRC. It is likely to show that retail sales are growing year-on-year, but by only around 2.5 per cent in nominal terms. This is because increased employment and confidence is offset by the ongoing squeeze on real wages.

Nevertheless, the RICS is likely to report rising house prices and sales on Thursday, with the increases fanning out from London. One reason for the price rises, though, isn’t simply foreign cash buyers and increased mortgage lending, but a lack of supply.

Overseas data, meanwhile should show a continuation of three recent patterns.

In the euro area, there's a weak and uneven recovery. Industrial production is likely to have risen in April, but only offsetting March’s fall. Output in April is likely to have been only slightly higher than in the first quarter as a whole.

China could show more signs of slowing. Official figures might show that annual industrial production growth, at around 8.5 per cent, is close to its lowest level since 2009 - when it was depressed by collapsing overseas demand. That might sound high, but there’s a suspicion that official data overstates growth.

And in the US there should be solid growth. Retail sales are likely to have grown in May, leaving them 3.7 per cent higher (in nominal terms) than a year ago.