UK manufacturing is booming. The CBI is expected to report on Monday that manufacturers’ export orders are near a record high, and that output is expected to continue growing strongly.
Other figures in the next few days will show us the main reason for this: the world economy is growing well.
In the eurozone, Germany’s Ifo survey might hit another record high, as expectations for future activity increase. Also, the National Bank of Belgium’s survey might show business confidence at a six-year high; this has for years been a good bellwether of the general eurozone economy. Money stock data from the ECB should be consistent with this. It should show that the M1 money stock has grown more than 9 per cent in the last 12 months: this has in the past been a good lead indicator of future output growth. And it could show a slight acceleration in bank lending growth. Financial conditions, then, are supportive of growth.
In the US, the Conference Board should report that consumer confidence is around a 17-year high, while durables goods orders should bounce back from last month’s dip. And the Philadelphia Fed’s survey of manufacturers should show output growing well, albeit not quite as much so as in recent months.
And in Japan, we should see another increase in industrial production.
Despite all this, however, the external sector is not contributing to UK growth. Friday’s data might well show that the current account deficit on the balance of payments widened in the third quarter, to around 5 per cent of GDP. And GDP data should confirm that net trade actually subtracted from growth in the quarter. One big reason for this is that because supply chains are globalised, increased exports require more imports.
While UK manufacturing is prospering, retailers are not. Although the CBI will report a rise in sales in early December – if sales match retailers’ expectations last month – it could warn that retailers aren’t optimistic about future conditions. We’ll see reasons for this on Friday. Polling group GfK might report that consumer confidence has fallen to its lowest level since early 2014. And GDP data could show that households were big net borrowers in the third quarter; this will cause economists to fear that even if real incomes do recover, people will use them to reduce borrowing rather than just increase spending.
The fragility of the personal sector might be evident in house prices. The Nationwide could report that annual house price inflation has fallen to around 2 per cent, its lowest rate since 2013.
