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Opinion

Next week's economics: 27 June - 1 July

Next week's economics: 27 June - 1 July
June 23, 2016
Next week's economics: 27 June - 1 July

In Japan, official figures could show a third successive monthly rise in industrial production, while the Tankan survey should report an improvement in companies' business conditions. In the eurozone, purchasing managers should say there has been a small increase in manufacturing output, helped by a pick-up in bank lending.

And in the US, the ISM survey should also reveal a rise in manufacturing output. We might also see the Conference Board reporting an increase in consumer confidence: this would be consistent with figures showing that house prices are rising steadily. It won't all be good news, though. GDP figures should confirm that corporate profits have fallen in the last 12 months - a fact that might help explain the sluggishness of capital spending.

In the UK, however, things might be more downbeat. If Tuesday's CBI survey reflects retailers' expectations last month, they'll show a drop in retail sales this month. Purchasing managers might report that manufacturing output was flat in the month. And the Bank of England could report that bank lending to companies, mortgage approvals and consumer credit growth have all fallen.

It's tempting to blame this upon the uncertainty caused by the EU referendum. However, this might not be the whole story. Other figures in the week will remind us that the economy has some more deep-rooted problems. National accounts figures on Thursday will show that there are big financial imbalances. The most spectacular of these will be the external deficit, which might be close to the record 7 per cent of GDP recorded in the fourth quarter. But it's also likely that companies are running a financial surplus.

Both these imbalances are symptoms of the same problem - a dearth of investment: the corporate surplus means that companies' saving exceeds their capital spending, while the UK's current account deficit is the counterpart to an excess of savings over investment in the rest of the world.

There are many reasons for this worldwide investment shortage, but other figures next week will remind us of one. They could show that 'core' inflation in the eurozone is more or less flat at less than 1 per cent - well below the 'close to' 2 per cent target. This will remind us that macroeconomic policy in the region has been too tight.