We’ll get an idea next week of how much damage the prospect of a hard Brexit is doing to the economy. Tuesday’s CBI survey will give us evidence on manufacturers’ business confidence, investment intentions, output expectations and order books. If these are anything like last month’s, the news will be grim.
Brexit is also worrying companies on the continent. The National Bank of Belgium’s measure of business confidence might fall to close to a four-year low, while Germany’s Ifo (business climate index) survey could show another drop in companies’ output expectations – although last month’s survey did show a stabilisation in current activity.
The latter, though, is still weak across the eurozone. Flash purchasing managers’ surveys on Thursday are likely to show that manufacturing output is still falling in the region and that services output is growing only slightly. This will be consistent with overall GDP expanding only marginally.
The same day, European Central Bank (ECB) president Mario Draghi is likely to use his press conference to say that he expects the region to avoid recession – with GDP projected to grow just over 1 per cent this year and next – although the risks of one are significant. He’s also likely to say that he expects inflation to rise towards its target (of just under 2 per cent) next year – although the ECB has been expecting this for years and has been consistently wrong.
It’s not just UK manufacturing that’s weak, though. So too are house prices. Rightmove is expected to report another drop in sellers’ asking prices last month. Uncertainty about Brexit is only partly to blame for this, however: perhaps more important is simply that houses have become unaffordable. In this context, lower asking prices are a good thing, as they should eventually help housing transactions recover – and it is these, perhaps more than the level of prices, that help to sustain consumer spending.
One indicator to watch in the US is Thursday’s durable goods orders. These are expected to show another slight rise, consistent with the economy continuing to grow. Although there are recession fears in the US, its economy is further from the reality of recession than is Europe’s.
