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OPINION

Next week's economics: Nov 24 - 28

Next week's economics: Nov 24 - 28
November 19, 2014
Next week's economics: Nov 24 - 28

The second estimate of third quarter GDP is expected to confirm that the economy grew by 0.7 per cent. The news will be in the expenditure breakdown. This is likely to show that consumer spending made the biggest contribution to growth, while net exports subtracted from growth. Figures on capital spending, though, will be especially interesting: these will tell us whether the OBR and Bank of England have been right to expect a big rise in business investment.

Other figures in the week should confirm that the consumer sector is quite healthy. On Wednesday the CBI is likely to say that retail sales grew well in the year to November. And on Friday GfK is likely to report that consumer confidence is near a seven-year high - although it has levelled off in recent months.

We'll see a reason next week why net exports haven't contributed to UK growth: our biggest trading partner, the euro area, is in the doldrums. Germany's Ifo survey on Monday could drop to a two-year low, which would be consistent with the economy stagnating. And official figures on Friday are expected to show that unemployment in the euro area has stuck at 11.5 per cent, with almost one-in-four under-25s out of work. Because of this weakness - and because of falling oil prices - inflation is very low. Other figures on Friday could show that it has fallen to just 0.3 per cent; the ECB's target is just below 2 per cent.

There might, though, be a small glimmer of hope for the region. Monetary data on Thursday could show that, for the second successive month, bank lending to the private sector has risen. This could suggest that the credit squeeze is coming to an end.

In the US, meanwhile, the figures should be better. Although Tuesday's second estimate of GDP might revise down third quarter growth slightly (from an annualised 3.5 to three per cent), this would still imply a steady expansion. This is expected to continue into the fourth quarter. Durable goods orders and new home sales - though both volatile - are both likely to have seen small increases last month.

Reflecting this, the Conference Board could report on Tuesday that consumer confidence has risen to its highest level since 2007. This should be encouraging for equity investors, as there has for years been a close correlation between annual changes in US consumer confidence and in the All-Share index.