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Next week's economics: 25-29 March

Next week's figures could show that the world economy is fragile and that housing markets in the UK and US are both weak
March 21, 2019

The world economy is still fragile, next week’s numbers will show.

In Japan, while official figures should show a recovery in industrial production after January’s steep fall, output will still be lower than in the spring – due to the trade war and China’s slowdown. In the eurozone, the National Bank of Belgium’s measure of business confidence (traditionally a good indicator of conditions across the eurozone) could post its lowest reading since August 2017. Worst still, one of the best lead indicators for the eurozone economy – the annual growth in the M1 money stock – might show a slight fall. This would suggest that a recovery is some way off.

The picture in the US might be brighter, however: we should see a pick-up in durable goods orders and a rise in consumer confidence to close to an 18-year high. Even here, though, there’ll be cause for concern. S&P is likely to report that house prices have fallen since the summer.

We’ll also see signs of weakness in the UK housing market. The Nationwide is likely to report that prices have been flat for months, and have risen only 0.5 per cent in the last 12 months – meaning they’ve fallen in real terms. This reflects weak demand which is perhaps only partly due to Brexit uncertainty: the Bank of England is likely to say next week that mortgage approvals have flatlined for the last two years.

Not unrelatedly, consumer confidence is low. GfK could say that it is close to its lowest level since 2013, despite low unemployment and a pick-up in real wages. The CBI, though, might report a slight recovery in retail sales this month after a flat February: retailers said last month that they expected such a pick-up.

On Friday, we’ll get further details of GDP growth in the final quarter of last year. These will probably confirm that the economy grew by 0.2 per cent, thanks largely to rising consumer spending. More interesting will be the sectoral accounts. These are likely to show a slight rise in the external deficit – to over 5 per cent of GDP. This means the UK is still a big net borrower from overseas despite the decline in government borrowing. This reflects the fact that households are borrowing more as the government is borrowing less.