The UK economy is flatlining, next week’s numbers could show. The Office for National Statistics (ONS) is likely to say on Monday that gross domestic product (GDP) recovered slightly in July after June’s dip. This would imply no growth in the latest three months compared with the previous three, and that GDP has moved sideways since January.
We might also see a flatlining labour market. Total hours worked are likely to have changed little in recent months, which means that our long stagnation in productivity is continuing. Tuesday’s figures might also confirm last month’s finding that unemployment has edged up, albeit due to an increased number of people in the workforce rather than to falling employment. A more meaningful measure of joblessness – unemployment plus those out of the workforce wanting a job – is likely to be little changed at just over 3.1m.
Markets will closely watch wage inflation numbers on the same day. These could show pay growth in the past three months edging up to 3.8 per cent, an 11-year high. With productivity stagnating, this implies a significant rise in unit wage costs. However, many economists believe that still-high unemployment and flat productivity will cause wage growth to fall back soon.
The housing market is also flat. The Royal Institution of Chartered Surveyors (RICS) is likely to say next week that estate agents’ increased optimism since early spring has been partly reversed, and that they expect demand and prices to be weak in coming months.
Elsewhere, we might get some mildly encouraging news. The People’s Bank of China could report that the M1 measure of the money stock has risen by around 5 per cent in the past 12 months. Though still weak, this is up from the near-zero growth we saw in January. This matters, because this has been an excellent lead indicator of output and commodity prices. It’s pointing to less-weak growth than a few months ago.
In the US, retail sales should show slight growth in August, consistent with a steady expansion. And inflation data should show both core and headline CPI inflation rates flatlining at 2.2 and 1.8 per cent, respectively. This means inflation is no barrier to the Fed cutting rates again.
In the eurozone, official figures should show that although industrial production recovered in July after a big fall in June, it is still below last August’s peak.
The European Central Bank (ECB) might respond to this on Thursday by cutting the deposit rate into even more negative territory or by expanding quantitative easing. How effective such moves would be is, however, a matter of doubt.
