British manufacturers are enduring brutal inflationary pressures as well as a downturn in demand in many of their major export markets, as the challenges facing the UK’s industrial sector provide a key theme in a relatively quiet week for data releases.

Industrial production data for July, due out on Tuesday, will show the downturn in output gathering pace. The consensus forecast is for the year-on-year decline in manufacturing output to fall from -1.3 per cent to -1.1 per cent. Survey evidence indicates new orders are declining and further weakness in output appears inevitable.

Cost pressures remain a huge challenge for the industrial sector. August producer prices data, due out on Monday, should show a modest dip in input costs from 30.1 per cent in July to 29.2 per cent.

The recent retreat for oil prices and other raw materials should eventually ease some of the pressure on manufacturers to raise their prices. Output PPI, or the cost of goods leaving the factory gate, is likely to moderate from 10.2 per cent to 10 per cent.

Analysts say weaker demand will limit manufacturers’ ability to raise prices but that will also put further pressure on profit margins.

Exporters should benefit from sterling’s weakness, with the trade-weighted exchange rate index down more than 15 per cent over the past 12 months. Crucially however, this benefit is being offset by weaker demand in key overseas markets.

UK trade data for July, due on Wednesday, will illustrate this dynamic, with the deficit of trade in goods expected to be £7.5bn, in line with the average monthly deficit for the first half of the year.

In the US, the dollar started to depreciate in early 2002 with the trade-weighted index still down 31 per cent since then. Although high oil prices are continuing to swell the bill for imports, the improvement in competitiveness provided by the weaker dollar has boosted exporters.

US export volumes rose almost 10 per cent in the first six months of 2008 compared with the same period last year. However, US trade data for July, due on Thursday, is expected to show the headline deficit widen from $56.8bn in June to $58bn.

Friday brings US retail sales data. Sales values are expected to have risen 0.1 per cent last month after a slight fall in July. On a volume basis, sales fell 0.3 per cent year-on-year in July - the first on that basis for almost six years - and Paul Ashworth at Capital Economics warns that US consumer spending is “almost sure” to contract in the third quarter. This would revive fears that the US economy may yet slide into recession in spite of the recent improvement in its trade performance.