The UK economy is growing more slowly than other western ones, next week’s numbers could show.
If the ONS’s first estimate of second-quarter growth on Wednesday corroborates NIESR’s estimate, it will show that real GDP rose 0.3 per cent – implying only very slight growth in GDP per head. The breakdown will probably show that growth in services offset falls in industrial and construction output.
Other data, however, might show that the mix of growth is changing. The CBI should report decent growth in manufacturing output and orders on Tuesday – although it might also say that investment intentions are still weak. But it might say on Thursday that retail sales have been weak this month, in large part due to falling real wages.
By contrast, overseas news should be good. On Monday, flash purchasing managers surveys should show that growth in the eurozone is around a six-year high, with both manufacturing and services doing well. Germany’s Ifo survey the next day might be even better, showing that manufacturing is growing at its fastest rate since the survey began in 1991.
One slight cloud, though, is that such strength might not persist. The Ifo survey is likely to show somewhat weaker expectations for growth, while the National Bank of Belgium’s survey could show business confidence at a 10-month low; this has been a good bellwether of eurozone growth in the past.
We should also see good growth in the US. The first estimate of GDP is expected to show annualised growth of 2.5 per cent in the second quarter – twice the UK’s rate. And other indicators should suggest such growth will continue. We should see a rise in durable goods orders on Thursday, while the Conference Board should say on Tuesday that consumer confidence, although below March’s 15-year high, is still way above average. These high spirits should be confirmed by news from the housing market, where we should see higher sales of existing homes and prices rising by over 5 per cent year on year. That’s strong enough to suggest households are in good financial health, but not so strong as to suggest there’s a bubble.
We’ll see what the Federal Reserve thinks of all this when it releases its policy statement on Wednesday. It is expected to leave rates unchanged (because inflation is not a pressing problem) but will hint at both rate rises and a modest reversal of quantitative easing later this year.
