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Next week's economics: 9-13 April

Chris Dillow

Chris Dillow

Next week could bring evidence that the UK economy is stagnating.

On Wednesday, the British Retail Consortium is expected to say that retail sales in March were only around 2.5 per cent higher than a year ago. This would imply that they are falling in volume terms. This suggests that the squeeze on real incomes and rising unemployment are continuing to deter households from spending.

Few economists expect consumer spending to contribute much to economic growth this year. A better hope lies with exports. And we'll see on Thursday how these are doing. The trade deficit in February is likely to be around the £7.5bn recorded in January. This would be consistent with net exports making a small positive contribution to GDP growth in the first quarter.

Figures the same day will show one reason why the contribution is only small – our exports are being held back because our main trading partner, the eurozone, is still weak. Although industrial production is likely to have grown slightly in February, output will probably be more than 3 per cent below August's peak, and is unlikely to have grown at all in the first quarter.

There should be brighter news in the US. The Fed's beige book – a survey of regional economic conditions – is likely to report that the economy is growing steadily, while Thursday's weekly unemployment claims should be consistent with a continued increase in employment.

This tendency for the US to grow faster than the eurozone (or Japan) will, however, leave a mark in the trade figures. These are likely to show that the US's deficit on goods and services is now on an increasing trend, thanks to faster growth in domestic than overseas demand and to higher oil prices. This probably doesn't (yet) have any implications for the US dollar. But it does mean that net trade will be a negative factor for GDP growth.

There are two other indicators to watch for. On Tuesday the Royal Institution of Chartered Surveyors might say that the balance its members reporting falling house prices has dropped to its lowest level since August 2010. Few, though, will take much comfort from this. It owes more to a lack of supply of houses than to increased demand. Most economists expect house prices to be more or less flat this year.

And on Friday, manufacturers' output price inflation could fall to 3.8 per cent, its lowest rate for over two years. However, input price inflation is likely to be around 7.5 per cent, due to recent rises in oil prices.

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