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Next week's economics: February 20 - 24

Next week's economics: February 20 - 24

Britain's manufacturers are in good shape. Monday's CBI survey is likely to show that order books and output expectations are both high, although firms are planning some big price rises.

This strength isn't confined to the UK. Purchasing managers' surveys are likely to show that euro zone manufacturing is growing at its fastest pace since 2011. This should be corroborated by a National Bank of Belgium survey showing that confidence is rising, and by Germany's Ifo survey showing that growth is strong in the country - although if it confirms last month's survey it will show a small dip in expectations for the next six months.

Official figures, however, might show that UK growth is unbalanced. Thursday's second estimate of GDP should confirm that the economy grew by 0.6 per cent in the fourth quarter. However, the breakdown of the data is likely to show that this growth was due mostly to strong consumer spending, with net exports also making a small contribution. It's possible that business investment was weak in the quarter.

This matters because consumer spending might not remain strong. We'll get a clue about this from the CBI's survey of retailers on Thursday. If firms' expectations last month were right, sales should recover after being unexpectedly weak in January. Even so, the picture might be that spending is less strong than it was in the autumn.

What's more, growth last year was not sufficient to greatly improve the public finances. Tuesday's numbers here for January's finances are important, as the month always sees a big surplus as self-assessed income tax, capital gains and corporation tax rolls in. Even with a big surplus, though, borrowing in the financial year so far is likely to have been around £50bn. This would put borrowing this year on course to far exceed the £55.5bn the OBR expected last March (February and March usually see big deficits). This would remind us that the global savings glut (which is the counterpart of UK government borrowing) is still very much with us.

There'll be two other developments to note in the week. In the eurozone, official figures should confirm the flash estimate that inflation jumped last month to 1.8 per cent, in line with the European Central Bank's target. However, all this is due to higher oil prices. The rate excluding food and energy should be unchanged at 0.9 per cent.

In the US, figures on sales of new and existing homes should both show recoveries in January from December's dips. However, both would be consistent with sales levelling off in recent months. This isn't yet a problem, but it might become one.

 

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By Chris Dillow,
16 February 2017

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Chris Dillow

Chris spent eight years as an economist with one of Japan's largest banks. Here, he provides insightful commentary on the latest economic news and data, along with thought-provoking articles about investor behaviour.

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