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OPINION

Next week's economics: May 25 - 29

Next week's economics: May 25 - 29
May 20, 2015
Next week's economics: May 25 - 29

In the euro area, the National Bank of Belgium's indicator of business conditions - which has tracked the general eurozone economy well - could rise for a fourth successive month, to a 13-month high. This would be consistent with Friday's figures from the ECB. These could show the M1 measure of the money stock (notes, coins and overnight deposits) rising more than 10 per cent year-on-year. This matters, because such growth has in the past been a leading indicator of stronger real growth. The figures will also show that bank lending is now picking up, albeit more so to households than to firms.

In the UK, the CBI is expected to report that retail sales were strong in May. This would be consistent with a Gfk survey on Friday which could show consumer confidence at a 13-year high.

However, official figures on Friday will show that the economy is dependent upon the consumer. The second estimate of GDP is expected to confirm that the economy grew by 0.3 per cent in Q1. But the expenditure breakdown could show that the consumer accounted for all of this, and that investment and net exports fell. This will exacerbate concerns that the economy is still unbalanced.

The figures will also show the income breakdown of GDP. These will probably show the share of profits in national income flatlining. Increased self-employment and stagnant labour productivity are hurting profits.

In the US, meanwhile, news could be mixed. Durable goods orders could show a small rise, and perhaps the first increase in non-transport orders for eight months. However, the Conference Board could report that consumer confidence has fallen for a second successive month. How much this matters is, however, doubtful. For one thing, confidence is likely to be well above last year's levels. And for another, the S&P/Case Shiller index of house prices - which should be a gauge of households' confidence in future economic conditions - is expected to show inflation of around 5 per cent, which is consistent with moderate optimism.

The US economy is probably expanding now, but this growth is coming from a lower starting point than expected. The second estimate of GDP might revise down the original estimate of growth from an annualised 0.2 per cent to minus one per cent. This, though, isn’t as dramatic as it seems. It means a cut in unannualised growth from around zero to around 0.2 per cent. Not only are forecasts inaccurate, but so too are estimates of the past.