Leading article: A perfect storm is brewing

All eyes will turn to the health of the British economy this week. Economic output figures for the second quarter of 2011 will be made publicly available tomorrow. The general expectation is that these figures from the Office for National Statistics will show disappointingly weak growth (following on from six months in which output was a flat as a pancake).

But that is not the end of the possible bad news. A perfect economic storm could be brewing abroad. Negotiations between the White House and the Republican-controlled Congress over the US budget are running out of time. If a deal is not agreed before 2 August, the US could run out of cash to pay its creditors. A default from the US on its bonds would hit global financial markets like an earthquake.

European leaders managed to patch over their differences and agree a fresh lending deal for Greece last week. But the eurozone crisis is not over yet either. A significant question mark still hangs over the solvency of Greece, Ireland and Portugal. And our largest banks have lending exposure to these nations running into tens of billions of pounds. Even if the US debt stand-off is eventually resolved, there could well be more lethal storms to come from across the Channel.

So weak consumer confidence at home could combine with overseas shocks that shatter our export markets and plunge British banks into chaos. The Business Secretary, Vince Cable, yesterday urged the Bank of England to consider another round of quantitative easing to boost domestic growth. But if the worst materialises, the pressure for a change from the Government over its fiscal plans is likely to become irresistible.