The UK economy has slowed down, next week’s numbers could show.
It would also mean that GDP in 2018 as a whole grew by around 1.4 per cent, which would be exactly what economists forecast in December 2017. This would remind us that economic forecasts are usually tolerably accurate in normal times: it is recessions that they fail to predict, not ordinary rates of growth.
The Office for National Statistics is likely to say that GDP grew by around 0.2 per cent in December, thanks to small rises in manufacturing, construction and services. This would mean it grew by 0.3-0.4 per cent in the fourth quarter, which would represent a slight slowdown from the third-quarter’s 0.6 per cent growth.
Official retail sales data could suggest that slow growth continued into this year. They are likely to show sales volumes were flat in January.
Other figures will remind us that inflation is not an issue. Although CPI inflation might have risen slightly last month, this would be largely because a petrol price fall last January has dropped out of the data rather than because of any new developments. In fact, producer prices should show that input prices have fallen significantly since the autumn and that output price inflation is at its lowest rate since late 2016.
Overseas figures will remind us of one reason for the UK’s slowdown – that our main trading partner, the eurozone, has done badly. Although official figures should show that industrial production recovered in December after November’s slump, this would mean that output in the fourth quarter was well below the third-quarter’s level.
US figures might also look bad, with retail sales and industrial production both falling in January. This is likely to be due at least in part to the government shutdown. In this context, the New York Fed’s survey of manufacturing will be important. It showed a big drop in both current trading conditions and companies’ expectations last month. If these don’t bounce back, it’ll be a sign that the economy’s challenges are longer-lasting than just the shutdown.
Inflation numbers, however, should be good. CPI inflation might drop to its lowest rate (1.7 per cent) since June 2017. And the core CPI inflation rate (which excludes food and energy) might also fall. This would suggest that there is no pressing need for the Fed to raise interest rates.
Equity investors should also get good news from the US Treasury’s survey of capital flows. This should show that foreign investors have been net sellers of US equities in the last 12 months. For the last 20 years, this has been a good lead indicator of rising global share prices in the following 12 months.
