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Next week's economics: 30 April - 4 May

Next week might bring news of better UK growth than in March, although it remains only moderate.
April 26, 2018

We’ll get some idea from next week’s purchasing managers’ surveys whether the UK economy is slowing down or not.

Last month, these surveys showed a drop in construction activity and a slowdown in the services sector. Both might have been due in part to March’s bad weather, so we should see a recovery next week. However, the underlying picture might well be one of growth being slightly lower than in the autumn. The manufacturing survey, which might show growth at a 10-month low, might be consistent with this.

Bank of England data on the money stock might also give grounds for concern. These could show flat mortgage applications which would be consistent with a stagnation in the housing market; weak growth in bank lending to companies, especially smaller ones; and the slowest growth in households’ bank deposits since 2011. All this might point to weak demand. On the other hand, though, the figures could also show a pick-up in consumer credit growth.

We might also see signs of a slowdown in the eurozone. Purchasing managers should confirm flash surveys, which showed that growth has slowed since the winter, albeit from a strong rate. And the first official estimate of first-quarter GDP could show a drop in growth from 0.6 per cent in the fourth quarter to around 0.4 per cent. The ECB might also report slower growth in the M1 money stock: this has in the past been a lead indicator of growth.

Nor is China doing well. Purchasing managers might report only weak manufacturing growth, as has been the case for months.

The US, though, might be doing better. The ISM should report strong growth in manufacturing – albeit not quite as much so as two months ago. And Friday’s figures should show net jobs growth of around 200,000 and perhaps a drop in the unemployment rate to 4 per cent.

We’ll also get some important inflation news. In the eurozone, core CPI inflation (which excludes food and energy) might be around 1.3 per cent, the same rate as last month but higher than in the autumn. And in the US, all eyes will be on Friday’s average hourly earnings data for any sign of faster annual growth than last month’s 2.7 per cent.

Having raised rates in March, the Fed is expected to leave the fed funds rate unchanged at Wednesday’s meeting. Most economists, however, expect more rises later this year – especially if we do see signs of higher wage inflation next week.