The UK economy might be perking up a little, next week’s figures could show. On Tuesday, the NIESR might estimate that real GDP grew by 0.4 per cent in the third quarter (Q3), very slightly up from Q2’s 0.3 per cent. Official figures the same day might be consistent with this. They should show that manufacturing output rose for a second successive month in August.
It’s not all good news though. The Office for National Statistics (ONS) could say on Tuesday that construction output is still weak; in July, it was 3.1 per cent down from January’s peak. This would be consistent with uncertainty about Brexit curtailing investment in long-lived assets. Also, while the Royal Institution of Chartered Surveyors (RICS) might report that house prices are rising slightly, at least outside central London, it will say that supply and demand are both subdued. This suggests the housing market is not a source of economic growth.
A further problem might be revealed by the Bank of England’s survey of credit conditions on Thursday. It could show that lenders are cutting back on unsecured household loans and are seeing increased defaults on them, albeit from a low level. This might warn us that consumer borrowing will no longer be a strong engine of growth, even if it isn’t an immediate cause of a downturn.
Overseas, we’ll see a reason for the strength of UK manufacturing – that our main trading partner, the euro area, is doing well. Official figures should show that industrial production rose in August, helped by higher output in Germany.
We should also get good news from the US. Friday’s figures should show that core consumer price inflation (which excludes food and energy) has been flat for several months at 1.7 per cent – a lower rate than we saw last year. This reminds us that falling unemployment has not raised inflation, which implies that there’s no hurry for the Fed to raise interest rates. Rises would be part of the process of normalising rates, rather than a response to inflation.
There will, however, be two concerns for the global economy. One is US consumer spending. Friday’s numbers could show that although retail sales rose in August, they are struggling, being flat in real terms in Q3 and up only 1 per cent year on year.
A second is that Thursday’s figures should show that monetary growth is slowing down in China. In the past, this has been a lead indicator of slowdowns in industrial production and in demand for commodities.
