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OPINION

Next week's economics: 27-31 Oct

Next week's economics: 27-31 Oct
October 23, 2014
Next week's economics: 27-31 Oct

Although The Fed is likely announce on Wednesday that it is finally ending quantitative easing, it could also say that a rise in interest rates is some way off, and that rises will be gradual when they happen.

Such an announcement isn't necessary to support US economic growth. Next week's figures are likely to show that real GDP grew at an annualised rate of 3 per cent in the third quarter. And Tuesday should see a rise in durable goods orders, which would corroborate economists' expectations that the third-quarter's pace of growth might continue. Instead, the Fed is likely to stress that inflation is expected to stay low - a view strengthened by the recent fall in oil prices.

The prospect of low US rates might, though, help comfort markets in the face of what could be worrying news from the eurozone. On Monday, Germany's Ifo survey could show a sixth successive monthly fall. And on Tuesday, the ECB is likely to say that bank lending to the private sector is still falling. All this will strengthen fears that the region might be slipping back into recession.

Partly because of the weak economy, Friday's figures could show another fall in inflation in the region, to just 0.2 per cent. Although this is partly a benign phenomenon - the result of falling oil prices - it will add to fears that the region might slip into outright deflation. This is worrying because falling prices would mean rising real interest rates, which in turn would increase fears for the sustainability of government debt in the south of the region.

Meanwhile, UK figures should point to a slowdown in consumer spending. If Monday's CBI survey is in line with retailers' expectations last month, it will tell us that retail sales growth slowed in October - although to a still decent pace. And on Friday, GfK could report that consumer confidence has been flat recently, having risen a lot in the spring. Although the Bank of England could report a rise in consumer credit growth, this might be due to consumers trying to tide themselves over as real wages fall, rather than to a big rise in optimism. Overall, the numbers should be consistent with economists' belief that the economy is slowing down gently.

Perhaps more significant will be Wednesday's numbers on bank lending to non-financial companies. These have shown small net lending in the last two months - although small companies are still repaying debt. If lending doesn't pick up, official forecasts of a big rise in capital spending will come into doubt.