The UK economy has slowed down slightly, next Friday’s figures could show.
The ONS is likely to say that real GDP rose by around 0.2 per cent in November, thanks in part to a rebound in manufacturing output after a weak October. This would leave growth at around 0.3 per cent for the three months ending in November, which is slightly less than we saw in the second or third quarters.
It would also mean that the economy performed exactly as expected last year. GDP is likely to have grown by 1.4 per cent in the year as a whole, which is precisely what the consensus predicted in December 2017. While the stock market got some nasty surprises last year, the real economy did not.
One reason for the UK’s slowdown is that the eurozone economy is doing poorly. Monday’s figures should show that retail sales were more or less flat in November, implying that they were lower than in June and that they probably barely grew at all in the final quarter. And official numbers on German industrial production should show that output is still lower than it was in the spring, Germany, more than most European economies, is suffering from China’s slowdown and the trade war: Thursday’s data should show that French output is growing okay.
The UK’s housing market is also weak. Data from the Halifax on Tuesday could show that prices barely rose at all during 2018. In itself, this is not necessarily a bad thing: it means housing is albeit very gradually becoming more affordable. However, the Halifax will also remind us that transactions are weak, thanks to low supply and weak demand caused by the need for large deposits. This is one factor that is depressing retail sales.
Investors worried about the course of US interest rates should get good news on Friday. Data, then, could show that annual consumer prices inflation fell last month to 2 per cent, its lowest rate since August 2017. This would be largely be due to lower oil prices. However, the 'core' rate (which excludes food and energy) should be around 2.3 per cent, the same rate as in June. All this would suggest that there is no pressing need for the Fed to raise interest rates.
On the other hand, job openings data on Tuesday might alarm the Federal Reserve. These will show that there are more job vacancies than there are officially unemployed people, and that vacancies are equivalent to 4.5 per cent of employment, the highest rate since records began in 2000. This shows that the labour market is exceptionally tight. The Fed will fear that this will eventually lead to higher wage and price inflation.
