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Opinion

Next week's economics: July 4 - 8

Next week's economics: July 4 - 8
July 1, 2016
Next week's economics: July 4 - 8

We might also see signs of a slowdown in the housing market. Last month, the Halifax and RICS both reported a big drop in demand for housing. They might say a similar thing in next week's reports, with this causing a fall in prices despite the ongoing shortage of supply.

It's tempting to attribute all this to the heightened uncertainty caused by the EU referendum. While this is probably part of the story - we know that policy uncertainty is usually bad for economic activity - it might not be the whole story. There are other reasons why activity is slowing.

In the housing market, we should expect some moderation in prices simply because of higher stamp duty, doubts about long-term income growth and the lack of affordability.

And other figures next week will remind us of a big constraint upon the UK economy - the fact that our trading partners aren't growing very much.

In the euro area, purchasing managers are likely to confirm their flash estimate that growth in the services sector fell to an 18-month low in June. And official figures from France and Germany could show falls in industrial production in May, albeit after nice rises in April. This would leave French production still below autumn's levels, and German output no higher than it was in the first quarter. All this will suggest that first-quarter GDP growth of 0.6 per cent hasn't been sustained and that the region is trapped into low growth.

US employment figures might be a little more encouraging, perhaps showing net jobs growth of around 200,000. Economists think this is consistent with GDP growth in the quarter of a little over 2 per cent (annualised) - which is decent, but far from exciting.

Those figures might also show that hourly wages have risen by around 2.5 per cent in the past 12 months - the same growth rate as at the end of 2015. This would suggest that unemployment (at 4.7 per cent) isn't yet so low as to trigger significantly rising inflation. However, with productivity not growing much, even low wage growth is not being offset by efficiency gains, so firms' costs are rising.