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Next week's economics: June 24 - 28

The US economy is doing much better than the eurozone, next week's figures will show.
June 20, 2019

We’ll get some important clues about the state of the eurozone economy next week. Last month, Germany’s Ifo survey showed manufacturing to be at its weakest since 2010, and the National Bank of Belgium found business confidence to be at a three-year low. Next week could see similar readings.

There might also be glimmers of hope, however. The European Central Bank (ECB) is likely to report that the M1 measure of the money stock is accelerating, growing by around 7.5 per cent year on year. This has historically been a good lead indicator of industrial production, and so points to an upturn later this year. The Ifo survey might be consistent with this, showing that expectations for future activity have stopped falling recently.

Other figures will show that inflation is not a problem in the region. Flash estimates are likely to show that core consumer price index (CPI) inflation is around 1.2 per cent, implying that it has flatlined for months well below the ECB’s target of just under 2 per cent. This mix of low inflation and weak activity is likely to reinforce criticisms of the ECB for not loosening monetary policy by more than it has.

The US, however, is in better shape. On Tuesday, the Conference Board is likely to report that consumer confidence is near an 18-year high. The housing market might begin to reflect this. The S&P/Case-Shiller index of home prices should now be rising, having stagnated from early last summer until the winter.

In the UK, however, the personal sector is not so strong. The CBI is likely to report that retail sales were weak in June. Although this would be due partly to the poor weather, we can’t blame the weather for Friday’s report from the Nationwide. It is expected to show that house prices were flat in June, implying an annual rise of only 0.2 per cent. Difficulties in raising deposits are outweighing high employment.

It’s not all bleak, though. Research group GfK might report a rise in consumer confidence. Though this won’t be very large, their survey should confirm that people are much more optimistic about their personal situation than about the overall economy – a feeling that should help support consumer spending.

We should also watch out for national accounts data on Friday. These will show a big rise in the current account deficit, to around 5 per cent of GDP. The counterpart to this is not just government borrowing, but also net borrowing by both companies and households. The latter might well be unsustainable.