Is the global economy coming off the boil? Some figures next week might tell us.
In China, purchasing managers could report a slowdown in growth, with their manufacturing index perhaps falling to a five-month low – although it should still point to output expanding. In Japan, official figures should show a recovery in industrial production after September’s drop, although this might be consistent with growth slowing slightly. And in the US, Friday’s ISM survey could show a fall in manufacturing growth.
For now, though, none of this is cause for concern as it would merely be a slight slowdown from a fast rate of expansion. Tuesday’s report showing that US consumer confidence is around a 17-year high will remind us that there’s much that’s going well with the world economy.
Eurozone data will confirm this. Purchasing managers should confirm that manufacturing is growing nicely. Unemployment should fall to a nine-year low. And ECB data should show not just growth in bank lending but also still-strong growth in the M1 measure of the money stock, which has been a good lead indicator of future growth.
Also, Thursday’s numbers could show that inflation in the region has fallen – on both the headline and core measure. This suggests the rise in the summer was not the start of a serious upward trend, which means monetary policy should remain ultra loose.
The global expansion is, however, not helping the UK as much as one might expect. Granted, Friday’s purchasing managers’ report will show strong growth in manufacturing. But Tuesday’s GDP data will show that net exports actually subtracted from growth in the third quarter. That means strong overseas growth and the weak pound haven’t boosted the external sector. Instead, the figures will show that growth was driven mainly by consumer spending.
The GDP figures will also be watched for any sign of an end to the long stagnation in business investment. In this context, Bank of England figures on Wednesday might also shed light. These have recently been puzzling, showing both a slowdown in the growth of corporate cash holdings (which might signal increased spending) but also a net repayment of debt (which signals a reluctance to invest).
Other Bank figures could point to a slight slowdown in consumer credit – perhaps due as much to tighter lending standards as to waning demand. Alongside last week’s retail sales figures, this will cast doubt upon whether the third quarter’s consumer spending growth can be sustained.
