The economy is growing slowly, which means there’s little chance of an interest rate rise soon, next week’s news might tell us.
Purchasing managers’ surveys are expected to show only moderate growth. In manufacturing, growth might dip to a 12-month low, and in services to an 11-month one. The construction sector might also be weak.
Bank of England data on lending isn’t likely to show a much cheerier picture. The good news is that these could show that lending to companies has increased recently. Such a welcome development is, however, mitigated by the fact that corporate cash holdings are also rising a lot.
In the household sector, we could see another drop in mortgage approvals, confirming a slowdown in the housing market. But we should also see that consumer credit is rising at a steady 10 per cent-plus annual rate. Some see this as evidence of irrational profligacy among consumers, but it might instead be a hopeful sign, that people are looking through the current squeeze on real incomes towards better times, and are borrowing in anticipation of them.
On Thursday, the Bank of England publishes its Inflation Report. This is likely to predict a drop in inflation next year. The recent fall in CPI inflation and surprising weakness of wage inflation has reinforced hopes that inflation will fall next year as the rise in import prices passes out of the numbers. With the Bank also likely to highlight the weakness of real growth, this will point to interest rates staying low.
This doesn’t, though, mean rises are off the table. If the Chancellor’s Autumn Statement retreats from austerity, looser fiscal policy might trigger a rate rise next year.
Overseas, we should see good growth, at least outside of China (where purchasing managers might report only a sluggish expansion). In the eurozone, purchasing managers should confirm that although growth slowed last month it remains near a six-year high, while official figures should show a drop in unemployment. And in the US, the ISM survey should show strong growth in manufacturing while Friday’s numbers should show a 200,000+ rise in net new jobs.
This growth is not, however, causing significant inflation. In the eurozone, Monday’s figures should show core consumer price inflation running at around 1.2 per cent – only a slight rise in recent months and well below target. And in the US, wage growth is likely to be stuck around 2.5 per cent despite unemployment falling to a 16-year low.
