Anxious wait for new data on slump
Economists are looking forward with some trepidation to events this week, with both the financial markets and the release of UK and other economic data providing economists much potential cause for concern.
Inflation numbers due tomorrow morning are likely to show the annual rise in prices up again, to around 4.4% in July, rising from an unexpectedly moderate 4.2% in June. The Bank of England said last week that the figure is likely to hit 5% in the autumn.
The overshoot on inflation will prompt Bank Governor Sir Mervyn King to post his seventh successive open letter in a row to the Chancellor, explaining why CPI inflation had remained more than one percentage point above the 2% official target.
The unemployment figures on Wednesday will produce little cheer and the public finances, due at the end of the week, are also likely to be viewed with some concern, though they may contain few surprises.
The latest minutes of the Bank's Monetary Policy Committee August meeting are also set set for release on Wednesday. Observers are keen to see the extent of the discussion on more quantitative easing and of any shift in voting patterns on easing policy.
More worrying are the increasing strains affecting the inter-bank lending markets as concerns about the solvency of European banking groups, especially French groups, continue to undermine confidence.
In money markets, the three-month Euribor:OIS spread, a measure of credit/liquidity risk in wholesale funding markets, has risen sharply to its highest level since April 2009. Though chiefly a European concern, the interdependency of the world's banking groups means problems in one nation quickly affect others. UK banks would be unlikely to be immune from such a contagion - hence the sharp arc down in their share prices in recent days.
A release of US industrial growth data will be a final clue to the prospects for growth. The Bank of England recently said the major risks to the UK came from outside its shores.
The expected rate of inflation by autumn