Join our community of smart investors
Opinion

Next week's economics: 27 Feb - 3 Mar

Next week's economics: 27 Feb - 3 Mar
February 23, 2017
Next week's economics: 27 Feb - 3 Mar

Purchasing managers are likely to say that British manufacturing output is rising strongly. This isn't merely (or perhaps even mainly) due to the weak pound but rather to rising world output.

In the US, the ISM is likely to report rising manufacturing output. With official figures likely to show a rise in durable goods orders, and the Conference Board reporting high consumer confidence, such strength might continue.

In the eurozone, purchasing managers' surveys should confirm flash estimates showing growth in manufacturing in the region. In China, surveys should show modest growth, after contractions in 2015 and much of 2016. And in Japan, official figures could show a fourth successive monthly rise in industrial production.

There might, however, be a few causes for mild concern in next week's numbers.

Although purchasing managers should also report decent growth in the UK service sector - albeit only at the same rate as a year ago - they might say that construction activity has slowed. This would be consistent with uncertainty about Brexit depressing spending on longer-lived assets. If Bank of England data shows the same pattern as the last two months, it would reinforce this impression by showing a drop in bank lending to companies.

Another concern is the consumer. GfK could report a dip in consumer confidence, which might suggest that rising inflation is slightly weighing on consumer sentiment. This might be having real effects, Last month, the Bank of England reported a drop in consumer credit growth in December. If Thursday's numbers show that has continued into the new year, economists' fears that spending growth will slow this year will be reinforced.

We'll also see a couple of uncertainties in the eurozone.

One is that inflation might rise yet again, to around 2 per cent - the ECB's target. This would be mainly due to food and oil prices: the core rate, which excludes these, might be only around 1 per cent. But it might reinforce fears that the ECB's days of easing policy are behind us.

Also, the ECB will report that long-term deposits with banks are still falling while short-term ones are growing. The question is what this means. Optimists read it as signs that households are preparing to spend, perhaps in response to low interest rates. Pessimists say it shows that people don't trust banks sufficiently to tie up their money with them.