The UK economy is cooling off, next week’s figures could show. Purchasing managers’ surveys could report that growth in both manufacturing and services in November was weaker than at any time since July 2016.
This is part of a global slowdown. In China, purchasing managers could report that manufacturing activity has fallen for the first time since May 2017 while the same surveys in the eurozone should confirm that growth is near a four-year low. Official figures on Friday should confirm this. They could show that the level of industrial production in Germany is lower than it was in the spring, while in France it is lower than a year ago. Not that the slowdown is confined to manufacturing. Wednesday’s figures could show that retail sales in the eurozone have been flat since early summer.
We might even see signs of a slowdown in the US, too. The ISM could report that manufacturing growth has slowed to a 16-month low. This would, however, still be strong by historic standards. Labour market figures should also be good. These should show another 200,000 growth in net jobs last month, and that the unemployment rate, at around 3.7 per cent, is at its lowest since 1969.
The US, however, has another problem. Friday’s figures could show that wage growth is now clearly trending upwards, and is at its highest since early 2009. This will reinforce expectations that the Fed will raise interest rates to curb inflation. It believes it can do so while slowing growth only slightly: it foresees GDP growth falling from 3.1 per cent this year to a still decent 2.5 per cent next. The stronger is wage inflation, however, the more markets will doubt such a benign prospect, and might instead fear that a sharper slowdown will be needed to control inflation.
Back in the UK, we’ll be reminded of the weakness of the housing market. The RICS could report that prices are falling because of weak demand. The Halifax should corroborate this, reporting that prices have fallen since the summer. While falling prices are not necessarily a big problem, weak turnover is, as it depresses consumer demand for lots of housing-related items such as furniture and carpets.
