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OPINION

Next week's economics: Aug 31 - Sep 4

Next week's economics: Aug 31 - Sep 4
August 25, 2015
Next week's economics: Aug 31 - Sep 4

On Tuesday, purchasing managers' surveys are likely to confirm that China's manufacturing sector is contracting at its fastest rate since 2009. This might be having spillover effects onto the US; the ISM survey could show a second successive fall in manufacturing growth, although this should remain positive. Purchasing managers in the UK are also likely to report positive growth, albeit at a slower rate than earlier this year.

Things might seem brighter in the eurozone: purchasing managers there could confirm that manufacturing growth is at a 15-month high. This, though, is more a sign of feebleness in recent months than great vigour now. Tuesday's unemployment figures will tell us that 11.1 per cent of the eurozone workforce is unemployed - with the rate among under-25s twice as high. That will remind us how far below potential the eurozone economy is.

We might also see weakness in UK bank lending to companies. Last month's numbers showed big net debt repayments by UK companies, dashing economists' hopes that a reduction in political uncertainty would encourage firms to spend. A repeat of that would reinforce fears that weak global growth and a lack of monetizable opportunities are holding back capital spending.

But we might also see signs of strength. Purchasing managers on Wednesday should tell us that growth in the UK services sector is still strong. One reason for this will be evident in Bank of England data; consumer credit is growing. So too is mortgage lending; the figures could show a second successive monthly increase in mortgage approvals, which would be consistent with signs of a stronger housing market.

Also, Friday's US labour market report might look good, with almost 250,000 net new jobs being created and the unemployment rate falling to 5.2 per cent, its lowest rate since April 2008. However, this might tell us not just that growth is strong - it’s probably below 3 per cent annualised - but also that productivity growth is quite slow.

We should also watch out for the flash estimate of eurozone area inflation on Monday. This could show a fall from 0.2 per cent to around zero, thanks to the recent fall in oil prices.