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OPINION

Next week's economics: 15-19 Feb

Next week's economics: 15-19 Feb
February 10, 2016
Next week's economics: 15-19 Feb

On Tuesday, the ONS could report that CPI inflation has risen to 0.4 per cent, its highest rate for 12 months. This will not, however, be because prices have suddenly risen: they are likely to have fallen in January. Instead, it will be because a big price drop last January, as food and petrol prices fell, will drop out of the data to be replaced by a smaller fall. This should not worry anyone.

The same picture will be seen in producer price data the same day. We should see manufacturers' input and output price inflation turn less negative, as big price falls last January are replaced by smaller ones this January.

In fact, wage figures on Wednesday should confirm that inflation isn't an immediate threat. They should show that wages rose by only 2 per cent in the year to the fourth quarter, thanks to low price inflation and a high supply of labour: other figures that day will show that there are 2.2m people out of the labour force who want a job, on top of the 1.6m officially unemployed.

A bigger concern, however, will be productivity. Wednesday's numbers could show that hours worked rose by more than GDP in the fourth quarter, implying that productivity fell. This will add to fears that the UK's long-term average growth rate has fallen.

In the US, we should see the same inflation story as in the UK, with Friday's figures showing a rise in CPI inflation as a small price fall this January replaces a bigger one.

More worrying, perhaps, will be output data on Wednesday. These could show industrial production well below the third-quarter's levels, a fact that is only partly due to January's snowstorm. In this context, the output expectations in Tuesday's Empire State survey will be important. Last month, these fell to their lowest level since 2009. A repeat of that would add to fears for the economy.

We'll also get a reading of optimism about the German economy, with Tuesday's ZEW survey. This could show that sentiment among finance professionals has fallen to its lowest level since the autumn of 2014.

There are two other things to watch for. One will be Friday's UK public finance numbers. These matter, because January should see big income and corporate tax revenues. Whether these will be enough to get borrowing back on course to hit the OBR's forecast is, however, doubtful.

Look out too for US capital flows numbers on Monday. These should show heavy foreign selling of US equities in the last 12 months - due perhaps to falling oil revenues rather than to a lack of confidence in the market.