UK economic growth might have picked up a little at the end of last year whilst the euro zone slowed, next week’s figures could show.
On Thursday the NIESR is likely to estimate that real GDP grew by 0.5 per cent in the fourth quarter. That’s very slightly up from Q3’s 0.4 per cent. Official figures will show one reason for this. They should show that industrial production rose a little in November, which would put us on course for quarter-on-quarter growth of around 0.7 per cent. Both manufacturing and oil output are likely to have contributed to this.
By contrast, euro zone data might hint at a slight slowdown. Official figures could show that although retail sales rose in November, this only partly offset October’s 1.1 per cent fall. The upshot is that retail sales might not have grown at all in the fourth quarter as a whole.
Other figures, though, won’t be so bad. The unemployment rate in the region could fall to 8.8 per cent, its lowest rate since 2008. And industrial production numbers should show a slight increase.
Overall, though, it’s possible that the region’s growth slowed in Q4 from the 0.6 per cent rate recorded in the second and third quarters.
In the US, by contrast, we could see signs of strength. Retail sales are expected to show a slight rise in December following two good rises. This could mean that sales in the quarter were up by almost two per cent in real terms – albeit having stagnated for much of the summer. This would be consistent with strong overall growth in the economy at the end of the year.
In this context, Friday’s inflation numbers will be puzzling. The core CPI rate (which excludes food and energy) is likely to be around 1.8 per cent. That’s lower than a year ago, despite the fact that unemployment has dropped to a 17-year low. The question of why a strong economy hasn’t raised inflation is puzzling the Fed, and is likely to cause it to raise rates only slowly this year.
Back in the UK, we’ll get more evidence of a weak housing market. The RICS survey is likely to report that prices have been flat across the country as a whole – and are falling in London – whilst the Halifax could report a slowdown in the annual growth of its index of prices, to around 3.5 per cent. Economists expect the market to stay subdued this year, with prices not rising much more than one per cent after inflation.
