Join our community of smart investors
OPINION

Next week's economics: 30 May - 3 June

Next week's economics: 30 May - 3 June
May 26, 2016
Next week's economics: 30 May - 3 June

Perhaps the most important of these will be Markit's survey of Chinese purchasing managers on Wednesday. It's possible that this will show that activity is stabilising, after 15 months of decline.

We could also see glimmers of improvement in Japan, where industrial production might rise for a second successive month - although it would remain below the autumn's levels.

The picture might be clearer in the US. The ISM survey should confirm that manufacturing is now recovering after shrinking in the winter. And we might also see signs that the consumer is in better spirits, with both house prices and the Conference Board's measure of consumer confidence rising.

One reason for this better sentiment is that the labour market is tightening, a trend that should continue in Friday's data, which are likely to show a rise in non-farm payrolls of almost 200,000 and perhaps a pick-up in wage growth.

In the eurozone, purchasing managers' surveys should confirm the flash estimates, which pointed to economic growth falling to a 16-month low. Despite this, we might see unemployment fall to a five-year low on Tuesday. This juxtaposition will remind us that the eurozone - like the US and UK - has seen a slowdown in productivity growth.

One curiosity in the region is that the narrow money stock is soaring: Tuesday's figures should show, yet again, growth of more than 10 per cent. Historically, this has been a predictor of stronger economic growth. However, this time it might instead be a sign that households don't trust banks sufficiently to tie up their cash in longer-term deposits.

Other figures on Tuesday could show that deflation in the region has ended, with inflation rising to zero. However, the rate excluding food and energy is likely to be around 0.8 per cent - which, give or take a tad, it has been for several months. This is significantly below the ECB's target of close to 2 per cent, implying that policy has been too tight.

In the UK, we might see signs of weakness. Purchasing managers' surveys could confirm last month's readings, which showed services growth at a 38-month low and manufacturing activity falling. This could be consistent with Bank of England figures that might show a drop in bank lending to companies. If we're lucky, this would be due to companies holding back spending because of uncertainty about the Brexit referendum - which should be just temporary. If not, it might reflect deeper downward pressures upon activity, such as weak productivity growth and a lack of investment opportunities.