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OPINION

Next week's economics: 1-5 May

Next week's economics: 1-5 May
April 27, 2017
Next week's economics: 1-5 May

On Monday, the ISM is likely to report that the manufacturing sector is continuing to grow nicely. And on Friday we should see a rise in non-farm payrolls of more than 200,000 as employment bounces back after March's weather-related soft patch.

Despite this, the Fed is likely to leave the Fed funds target rate unchanged at 0.75-1.0 per cent, although it will retain its forecast of "gradual increases" this year.

One reason for this is that low unemployment (Friday's data should show a rate of around 4.5 per cent) isn't raising inflation much. Friday's figures could show that average hourly wages have risen only 2.7 per cent in the past 12 months. That's much the same rate as in the autumn. This might be a sign that the unemployment rate overstates the tightness of the labour market; the proportion of the population that's in work is still far below its pre-crisis levels, which suggests there's still a big excess supply of labour.

In the UK, meanwhile, we might see signs of moderate growth. Purchasing managers should report decent growth in the services sector, but perhaps a slowdown in manufacturing growth to a five-month low, although the rate here will still be respectable. Growth in construction, however, might be weaker.

Bank of England data on Thursday will shed light on corporate behaviour. Last month, it reported a drop in bank lending to companies and a rise in companies' cash holdings. That's consistent with ongoing weakness in capital spending. This might be because Brexit-related uncertainty is making companies reluctant to invest in long-lived assets - although there are several other longstanding reasons for weak capital spending.

Elsewhere, purchasing managers should report modest growth in Chinese manufacturing, albeit with no sign of growth accelerating.

From a long-term perspective, though, the most significant figures might be Thursday's US productivity numbers. These are likely to show little growth in output per worker hour in Q1, which would confirm a strong long-term slowdown. In the past five years, for example, productivity has grown by 0.6 per cent a year, compared with 2.2 per cent annual growth in the 50 years to 2007. This tells us the economy's trend growth rate is much lower now than it was a few years ago.