Next week will bring further evidence of weakness in both the UK and US economies - both among producers and consumers of goods.
In the US, surveys of manufacturers by the Philadelphia and New York Feds are likely to show that output in the regions is falling. Official industrial production numbers might corroborate this. Although those numbers could show reasonable quarter-on-quarter growth, of around 0.7 per cent, this would be largely due to a good April, and there's little momentum behind growth going into the third quarter.
Retail sales data might confirm this weakness. Although June could see a bounce back after May's drop, growth in the second quarter could be a mere 0.3 per cent in nominal terms. This will add to calls for the Federal Reserve to resume quantitative easing.
In the UK, the picture for retail sales could be even worse. It's entirely possible that Thursday's numbers will show that sales volumes fell in the second quarter. Interpretation of this will be complicated by June's poor weather and Jubilee celebrations. However, other figures in the week will suggest that there is a fundamental reason for weak sales - namely, that real wages are falling. Although Tuesday's numbers might show another drop in consumer price inflation, thanks to lower utility bills and the dropping out from the numbers of a rise in food prices last June, prices will still have risen much faster than wages in the last 12 months - by around 2.7 per cent compared with around 1.5 per cent. Given this, and the lack of credit growth, retail sales have been quite resilient.
Perhaps a bigger issue next week will be Wednesday's unemployment numbers. The recent fall in these has been puzzling, given that GDP has fallen. This implies either that labour productivity has fallen sharply, or that GDP is under-recorded, or employment over-reported. This puzzle means that many economists doubt that unemployment will continue to fall for long.
A further concern could come in Friday's public sector finance numbers, which might show that public sector current borrowing so far this financial year has been higher than in April-June 2011. Although it is too soon to say for sure that this means borrowing will overshoot its forecast, it will prompt Keynesians to argue that fiscal austerity is a poor way of reducing borrowing.
We could also see evidence of weakness in the euro area on Tuesday, in Germany's ZEW survey. Recently, this has shown a big drop in forecasters' optimism for the economy, and this could continue.
There are two other figures to watch out for, both on Tuesday. One is US consumer price inflation. The headline number might fall, to around 1.6 per cent, thanks to lower petrol prices. But the 'core' rate (which excludes food and energy) could stay at 2.3 per cent, implying inflation has risen significantly in the last two years, despite mass unemployment. This is consistent with a worsening inflation-unemployment trade-off.
The other is capital flows data. These have recently shown only slight foreign buying of US equities - which is a slightly positive sign for equity returns in the next 12 months.
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