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Next week's economics

Created:
11 November 2008
Written by:
Chris Dillow

Has the UK consumer finally cracked? We'll find out in next Thursday's official retail sales figures, which will tell us whether September's 0.4 per cent fall was just a blip, or the start of a longer decline.

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Most economists expect the former, with sales recovering a little to leave them around 2.5 per cent higher than in October 2007. The three month-on-three month change will, however, be negative albeit largely because sales spiked upwards in May.

One reason for sales to hold up is that bank lending is doing so, despite the credit crunch. Other figures on Thursday should show that aggregate lending has grown at an annualised rate of more than 12 per cent in the past three months.

We will see on Wednesday how the monetary policy committee reads the economy, when minutes of its last meeting show why it decided to shock the markets with that 1.5 percentage point cut.

One contributor to that decision is of course the fact that inflation outlook has improved. Tuesday's numbers should corroborate this by showing that consumer price inflation fell in October, thanks to falling petrol prices.

In the US, meanwhile, Tuesday's industrial production figures will be important. Last month, output fell 2.8 per cent, mostly due to the effect of a strike at Boeing and two hurricanes. Anything less than a 2.7 per cent rise would be a sign that the economy is shrinking. Elsewhere, other figures next week will be grim. Housing starts (Wednesday) and leading indicators (Thursday) could both fall.

Inflation figures, by contrast, should look better, with consumer and producer price inflation heading down. For now, this is due mainly to lower oil prices. But few doubt that the decline will become more widespread soon.

Back in the UK, look out for Thursday's public borrowing numbers. There's usually a surplus in October as VAT and corporation tax receipts come in. Few economists, however, expect the numbers to suggest anything other than the fact that net borrowing will exceed the Chancellor's £43bn forecast this year.

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