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Next week's economics: 26 - 30 Nov

Next week's figures could show Japan and the euro are are weak, but that the US is still growing nicely
November 22, 2018

Parts of the global economy have cooled off markedly, next week’s numbers will show.

Germany’s Ifo survey is likely to show a slowdown in economic activity, while in Japan official figures should show that although industrial production rose last month it is well below its spring levels. All this will show that China’s slowdown and the trade war are hurting the more cyclical economies.

There might, though, be glimmers of hope in the eurozone. The ECB could report on Wednesday that bank lending is still growing steadily and that growth in narrow money has picked up recently; the latter is especially good news as it has been a good lead indicator of economic growth in the region. What’s more, Friday’s figures should show that inflation excluding food and energy has been steady for months at around 1.3 per cent. That means there’s no need for the ECB to tighten policy for a long time.

In the UK, we might see evidence that rising wages are not yet cheering consumers up. Although the CBI might report a pick-up in retail sales in November, this would follow a weak autumn for the high street. GfK is likely to say that consumer confidence has been flat for months, while the Bank of England could report a slowdown in consumer credit growth, suggesting that households are using higher wages to reduce borrowing.

The housing market is especially weak. Bank of England data will show that mortgage approvals have been flat for months, while the Nationwide could say that house prices have fallen slightly in recent months. This is mixed news. On the one hand, with wage growth rising it means housing is (very gradually) becoming more affordable. On the other hand, such weakness might in the near term weigh down consumer spending.

In the US, news might be mixed. GDP data should confirm that the economy is holding up well, with growth in the third quarter of around 3.5 per cent annualised, only slightly down from the second-quarter’s hefty 4.2 per cent. Consistent with this, the Conference Board should report that consumer confidence is near an 18-year high.

On the other hand, there are signs the housing market is cooling off. The S&P could report that prices have been flat in recent months. This isn’t yet cause for alarm, but it is something that needs watching.