Next week could bring signs from around the world that the global economy is doing well.
In the US, the Conference Board could say on Tuesday that consumer confidence is close to a 17-year high. Other figures the same day should show that the housing market is doing well, with house prices rising by almost 6 per cent year on year and new home sales up in August after a dip in July. The following day should see a rise in durable goods orders last month too.
In China, Friday’s purchasing manager’s survey could show the strongest growth in manufacturing output since December. And in Japan official figures should show a rise in industrial production last month.
We should also see strength in the euro area, where Germany’s Ifo survey should show that business conditions are close to their best since the survey began in 1991.
There might, however, be a couple of straws in the wind to suggest that the eurozone’s growth will slow down over coming months. On Wednesday, the European Central Bank (ECB) should report that growth in the M1 measure of the money stock is slowing somewhat, albeit from near-10 per cent growth – in the past this has been a leading indicator of slower growth in output.
And Friday’s flash inflation estimate could show that the core rate of consumer prices inflation (CPI) inflation has risen to 1.4 per cent; until earlier this year it was below 1 per cent. This tells us that – in stark contrast to the UK and US – falling unemployment does seem to be stoking up inflation. This might lead the ECB to increase interest rates next year.
In the UK perhaps the main news will concern household borrowing. National accounts figures on Friday could show that households’ net borrowing fell in the second quarter, having hit a record high in Q1. This process might be continuing; Bank of England data could show that consumer credit growth is slowing. Such numbers might add to economists’ concerns that consumer spending will be held back not only by falling real wages, but by some households’ desire to rebuild their balance sheets.
Other figures on Friday could show that the UK’s external deficit in Q2 was close to Q1’s £16.9bn; as a matter of accounting identity, this is the counterpart of household and government borrowing. This will remind us that sterling’s fall last year hasn’t done very much to reduce the trade deficit.
