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Next week's economics: 23-27 Oct

The UK economy might be strengthening a little, according to next week's figures
October 19, 2017

UK economic growth has accelerated a little, next week’s figures might show. If the ONS’s first estimate of third-quarter GDP corroborates NIESR’s estimate it will show an expansion of 0.4 per cent, slightly up on the second-quarter’s 0.3 per cent.

In itself, this is only weak evidence: the numbers are subject to revision later and 0.1 percentage points is well within the margin of measurement error. However, CBI surveys next week might also point to reasonable growth.

If Thursday’s survey confirms retailers’ expectations, it will show that retail sales grew nicely in the year to October, albeit slightly less so than in September. And Monday’s survey of manufacturers should show good growth in output and export orders. It could also, however, show weak investment intentions and rising unit costs as a result of ongoing stagnation in productivity.

Other figures will show one reason why the UK economy is doing okay; our main trading partner is growing nicely. Tuesday’s flash purchasing managers’ surveys could show strong growth in both services and manufacturing – with the latter at the fastest rate since 2011. ECB figures on Thursday will show one reason for this. They should show that bank lending to households and non-financial companies is growing nicely.

We might, though, see tentative signs that such growth is about to slow. Germany’s Ifo survey could show a small drop in businesses expectations for future activity – albeit from a high level – as might the National Bank of Belgium’s business confidence survey. Neither of these, however, are any cause for alarm yet  – especially as Thursday’s figures should show continued fast growth in the narrow money stock, which has in the past been a good leading indicator.

In the US, Friday’s first estimate of third-quarter GDP should show a slowdown, from a 3.1 per cent annualised rate in the second quarter to around 2 per cent. Some of this would be the temporary effects of Hurricanes Harvey and Irma, and durable goods orders on Wednesday should show a rise. The underlying picture is probably one of growth wobbling around a 2.5 per cent trend. This is unspectacular but perhaps sufficient for the Fed to raise interest rates later this year as part of a slow normalisation of rates.