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Next week's economics: 3-7 February

Next week's figures should show that the global downturn in manufacturing is now easing off
January 30, 2020

Next week might bring signs that the global manufacturing downturn is starting to ease.

In the US the ISM index of manufacturing activity might increase after hitting its lowest point since June 2009 last month as sentiment improves on hopes of an easing of Sino-US trade tensions – but it will probably still show output falling. In China itself, purchasing managers could report that output is rising, albeit very slightly. And in the UK and eurozone final surveys should confirm purchasing managers’ flash estimates, which showed output falling at a slower rate than in recent months.

Official figures from the eurozone might be even better. In France, these could show a fourth successive monthly rise in industrial production. And in Germany – where output has been hard-hit by the trade war and falling car production – we could see signs of production levelling off: it should be higher in the last two months than it was in July and August.

Outside of manufacturing, things are a little better. In the UK and eurozone, purchasing managers should confirm that the services sector is expanding – although in the UK construction activity is still dropping. And official eurozone data should show that retail sales volumes rose by around 0.4 per cent in the final quarter of last year.

US labour market data will show that the same is true in the US. These should show yet another increase in net employment, of a bit under 200,000. This should keep the unemployment rate around 3.5 per cent, its lowest rate since 1968.

This is not, however, triggering higher inflation. Quite the opposite. Other figures on Friday should show wage growth running at an annual rate of around 3 per cent – which is less than a year ago.

One reason for this is that many companies cannot afford to pay much more. Thursday’s official figures should show that productivity in the non-farm business sector rose only slightly in the fourth quarter, reversing the third-quarter's slight drop. This would leave it about 1.6 per cent higher than a year ago. If output per worker isn’t rising much, nor can real wages per worker.

Finally, we might see signs of a recovery in the UK housing market. The Halifax could say on Friday that house prices are around 4 per cent up on a year ago. Although data from other sources are not as strong as this, some do agree that house price inflation has perked up a little recently.