The UK and eurozone economies are slowing a little, next week’s numbers could show.
On Wednesday, the ONS should report that GDP rose slightly in August. Although this would put the economy on course for growth of over 1 per cent in the third quarter, it would suggest that the expansion has slowed in the last two months. This is partly because of shortages of some materials and staff, but also because the post-lockdown boost in consumer spending seems to have been smaller than some hoped.
We should also see a small drop in unemployment next week, to around 1.5 million or 4.5 per cent of the workforce. This is some 200,000 higher than before the pandemic. A wider measure of joblessness – which also counts people outside the labour force wanting a job – will however be close to its pre-pandemic low. Total hours worked, though, will still be below their pre-pandemic levels, suggesting that overall demand for labour is still depressed.
Both GDP and unemployment numbers, however, refer to periods before the end of the furlough scheme, rise in gas prices and cut in universal credit all of which could cut economic activity.
The ONS will also report a slowdown in annual earnings growth. This is simply because weekly wages rose last August as hours increased after the lockdown. The figures could also show that wages so far this year have actually risen by less than inflation.
The eurozone could also see signs of slower growth. Official figures could show only a small rise in industrial production in August, leaving it not much above April’s level, and the ZEW survey of finance professionals could show further drop in optimism. Both will in part be due to shortages of materials (such as chips for cars) holding back production.
In the US, we could see mixed news on activity. The New York Fed’s survey is likely to show rising output and orders and high optimism. But retail sales might post only a modest rise in September, leaving them lower than in March and April.
We’ll also get mixed news on US inflation. That New York Fed survey could show that firms are still reporting big rises in the cost of materials. And CPI data on Wednesday could show that headline inflation is stuck at around 5.3 per cent. On the other hand, though, the CPI inflation rate excluding food and energy should be down to around four per cent, from 4.5 per cent in May, and month-on-month increases in prices are moderating. The inflation debate, therefore, will rumble on.
