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Next week's economics: 4-8 Dec

Next week should bring news of a slight pick-up in UK growth, and continued good growth in overseas economies
November 30, 2017

UK economic growth might be picking up slightly. The NIESR could estimate on Wednesday that real GDP grew 0.5 per cent in the three months to November. That compares with 0.4 per cent growth in the third quarter.

Their report should be consistent with other data next week. Purchasing managers are likely to report strong growth in the service sector – perhaps at a seven-month high. And the ONS should report that manufacturing output rose slightly in October, although it remains below not just 2007’s peak but also 2000’s.

Growth will, however, be patchy. On Monday purchasing managers are likely to report that construction activity is flat. And on Friday the ONS is likely to say that the UK’s trade deficit remains large, at around £35bn in the last three months. This means net trade is contributing nothing to GDP growth.

This is despite the fact that overseas economies are doing well.

In the eurozone, purchasing managers should confirm their flash survey showing that services activity is growing strongly; official data in Germany and Italy should point to industrial production rising after falling in September; French industrial output should show another small increase; and retail sales volumes in the eurozone should be up by well over 2 per cent year on year in October. All this would be consistent with the region continuing to grow at around the 0.6 per cent it achieved in the third quarter.

We’ll also see signs of continued expansion in the US. Friday’s non-farm payrolls should show an increase of around 200,000, and unemployment might fall to 4 per cent, its lowest rate since 2000. Despite this, annual wage inflation is likely to be around 2.5 per cent, implying no increase since mid-2016. Nevertheless, the figures are expected to give the Fed a reason to raise interest rates soon. This isn’t because of any immediate inflation danger, but simply because the economy is strong enough for interest rates to gradually return to more normal levels.

Back in the UK, we might get mixed signals about house prices. The RICS survey could show prices flat, with falls in the south east offset by rises elsewhere but both supply and demand weak. The Halifax, however, might show a small monthly rise in prices, which would continue a reversal of the fall we saw in the first half of the year. Prices are likely to be up by around 4 per cent year on year – although this is only 1 per cent in real terms.