Good news for the post-Brexit UK economy and five other things to look out for this week

Keep eyes peeled for angst about the possible faltering the US economy; China’s retail sales and industrial output figures; indications about the strength of the European banking system and automated management reforms 

Hamish McRae
Sunday 11 September 2016 17:02 BST
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The Bank of England’s monetary policy committee decision on interest rates will be decided on Thursday
The Bank of England’s monetary policy committee decision on interest rates will be decided on Thursday (Reuters)

There will probably be better news this week about the UK economy, but maybe worse news from the world’s financial markets.

Why so? Well, first the domestic side of things. This is quite a busy week for information about the UK economy. There are inflation figures on Tuesday, unemployment and employment on Wednesday, and then on Thursday the decision, or almost certainly non-decision, of the Bank of England’s monetary policy committee on interest rates. It would be a surprise were inflation not to pick up a little following the fall in the pound since June, for higher import prices eventually do feed through into domestic inflation. It would be a surprise too if employment has started to fall, for despite the shock to business confidence as a result of the Brexit vote, there should be enough momentum in the economy to keep growth running through the next few months. There might be some evidence of slowing consumer demand in Thursday, with the retail sales figures. But the biggest surprise of all would be for the MPC to make any changes to monetary policy. After the cut in rates last month, a controversial decision since the economy has performed better than expected, it will surely want to sit on its hands for a while yet.

So expect quite a lot of news about the economy, but expect this to confirm the now general perception that for the short-term at least, things are fine. The greater concern is a more general angst about the possible faltering the US economy. The next thing to look for is any evidence of this. We ended last week with troubled markets. It is always hard to pin down quite why there should be a sudden wave of fear because there was not really any new hard information to justify it. However business surveys have been poor, and share markets – reflecting such concerns – had a bad week. There is no particular reason to fear another US recession, and retails on Thursday should be reasonably strong, but the economy is running pretty close to full capacity so some slowing is likely eventually. And then there is politics.

Third, look at China. We get retail sales and industrial output figures. Are all those scares about growth just scares? You have to take any figures with a pinch of salt, and the transmission mechanism between the Chinese economy and the rest of the world is unclear. We feel it mostly through changes in commodity prices, because China’s imports of those are the largest single influence on their prices.

Fourth, look for any indications about the strength of the European banking system. Unlike the US banks and in a rather different way the UK ones, most European banks have failed to rebuild their capital, or at least to do so to a sufficient extent. The German finance minister Wolfgang Schäuble is deeply concerned about this and he is right to be.

Finally, a less immediate but ultimately most important issue: the way automated management puts pressure on workers. The point here is that there is growing concern about the way the often nominally self-employed service workers who provide labour to companies such as Uber and Amazon are treated. The string of stories about exploitation have rightly led to pressure for reform, and people on the right as well as the left are starting to think about the need for some form of political intervention. Any information about the government’s intentions would be most welcome.

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