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OPINION

Next week's economics: Nov 28 - Dec 2

Next week's economics: Nov 28 - Dec 2
November 24, 2016
Next week's economics: Nov 28 - Dec 2

In China, purchasing managers might report that manufacturing is expanding at its fastest rate since mid-2014. In Japan, official figures could show that industrial production is rising. And in the US we should see an increase in the ISM index of manufacturing and a rise of around 200,000 in non-farm payrolls - although the latter will be flattered by the fact that jobs were temporarily depressed last month by Hurricane Matthew.

This upswing is spreading to Europe. Purchasing managers surveys should confirm flash estimates that manufacturing output picked up in the euro area - a recovery perhaps helped by the fact that bank lending in the region is also accelerating, as Monday's figures could show.

In this context, we should expect UK purchasing managers to also report an increase in manufacturing activity. This is not just because sterling's fall has made exports more competitive - many exports aren’t very price-sensitive - but simply because overseas demand is improving.

We might, however, see a couple of clouds in the data.

Wednesday's figures could show that consumer confidence is lower than it was earlier this year, perhaps because people are worrying about the impact sterling's fall will have on prices.

And Friday's survey of purchasing managers in the construction sector could show that while activity here is growing it is doing so at a slower rate than earlier this year. This would be consistent with the possibility that uncertainty about the terms of Brexit is depressing spending on longer-lasting assets such as buildings: economists expect business investment to fall in coming months.

Is the global upswing raising inflation? We'll get mixed signals.

In the US, Friday's figures might confirm that wage inflation is trending upwards, albeit gradually. This might tip the Fed into raising interest rates soon.

However, Wednesday's figures in the euro area could show that consumer price inflation rose only slightly this month and that the rate excluding food and energy has been stable at around 0.8 per cent for months. This perhaps is due to a fact we'll seen on Thursday - that unemployment, at around 10 per cent, is twice that of the US. This points to euro area interest rates staying negative for some time.

It's tempting to think that rising US rates but negative euro area ones will fuel a rally in the US dollar. The tricky question, though, is: is this prospect already fully discounted?