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Opinion

Next week's economics: 5-9 June

Next week's economics: 5-9 June
June 2, 2017
Next week's economics: 5-9 June

On Monday, purchasing managers' surveys should confirm initial findings that growth in the services sector in the eurozone hit a six-year high last month. The following day, official figures should show that retail sales volumes have risen almost 3 per cent in the past year. And later in the week we should see that industrial production rose in April in France, Germany and Italy, confirming good upward trends.

The UK, however, isn't fully sharing in this. Although purchasing managers should report decent growth in services last month, the NIESR could say on Friday that GDP grew by only 0.2 per cent in the past three months - which would mean no growth at all in GDP per head. And Friday's official figures could show that, while manufacturing output rose in April, this was not enough to fully offset falls earlier this year, so that output is still below December's levels.

Other figures on Friday will show one reason for this. They should show that, while the UK's trade deficit narrowed in April, it was much wider in the past three months than at the end of 2016. This is because import volumes have risen even faster than exports.

This will remind us that the boost to net trade from lower exchange rates is small. This is partly because exporters raise prices as sterling falls, but also because exports have a high import content, so that even where exports do rise they suck in imports. This is a big reason why economists expect only moderate growth this year despite last year's devaluation.

We'll also get news on the housing market from Halifax's house price index and the RICS. This could show that house price inflation has slowed sharply, and Halifax's data could show that prices have fallen since December. This reflects a lack of affordability, falling real wages, tax increases for buy-to-letters and also perhaps uncertainty about Brexit; latest official figures show a rise in the number of EU nationals leaving the UK.

Most economists, however, don't expect a big fall in house prices, partly because mortgage rates will stay low, but also because a lack of supply will underpin prices. The latter, however, is hardly a healthy development.