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Next week's economics

Created:
16 July 2008
Written by:
Chris Dillow

Economists are hoping next Thursday's official figures will clarify what's happening on the high street. Last month, the Office for National Statistics surprised everyone by reporting a 3.5 per cent leap in sales volumes in May. Everyone expects that rise to be reversed, the question being: to what extent?

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However, even a 4 per cent fall in June would still leave sales up by 1 per cent on the previous quarter. Thanks to this, it's likely that the UK avoided recession in the second quarter. Friday's first estimate of GDP (which is subject to revision) is expected to show that the economy grew by 0.1-02 per cent in the second quarter. Although we won't get a breakdown then, this is probably because growth in the high street and in government spending offset declines in manufacturing and construction. This would mean annual growth has fallen to 1.5-1.6 per cent - its slowest rate for six years.

Wednesday's quarterly survey by the Confederation of British Industry (CBI) could confirm manufacturing's recession, showing that order books are falling. This is worrying because, with the pound low and world trade growing tolerably, one would look to manufacturing to offset some of the recessionary forces coming from the housing market. Those forces could be highlighted on Monday, when Rightmove is likely to report that asking prices for houses are now falling - suggesting that house sellers are starting to get the message.

Also on Wednesday, we'll see the monetary policy committee's latest thinking on interest rates, when it releases minutes of last week's meeting. These'll show that the committee is seriously thinking of raising rates.

In the US, meanwhile, figures are likely to be downbeat. Economists expect to see falls in the index of leading indicators (Monday), sales of existing homes (Thursday) and new home sales and durable goods orders (Friday). Optimists might take comfort from signs that the pace of decline in housing sales seems to be slowing.

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