The UK economy is being hit by a global slowdown, next week’s numbers might show.
Purchasing managers might report on Friday that manufacturing growth, while still healthy, has fallen to its slowest pace since late 2016. One reason for this is that our main trading partners are cooling off.
In the eurozone, purchasing managers should confirm flash estimates which showed that manufacturing growth has slowed since the winter, although it remains reasonable. This message might be confirmed by figures from the ECB. These could show a slowdown in bank lending growth and in the growth of the M1 measure of the money stock; the latter has in the past been a good lead indicator of economic growth generally.
In Asia, purchasing managers might report ongoing sluggish growth in China – with especially weak exports – and only a small rise in Japanese industrial production.
And in the US, the ISM could report that manufacturing growth has slowed recently. Any concern about this should, however, be offset by a report from the Conference Board which should show that consumer confidence is close to an 18-year high, and by Friday’s labour market figures which should show continued growth in jobs with unemployment at an 18-year low.
It’s not just a slight slowing in overseas demand that we should worry about, however. The UK consumer is also in poor shape. GfK is likely to report that consumer confidence is weak, albeit slightly less so than in the winter. Bank of England data might corroborate this. They could show aggregate consumer credit growth falling to its lowest rate since 2015. If this is because real incomes are rising enough to allow some to repay their debt, it’s good news. If it reflects pessimism about the future, however, it's not so good.
And housing market data might suggest the latter. Other Bank data could show that mortgage approvals are weak. And the Nationwide could report that house prices were flat this month, implying that they’ve not increased in real terms over the last 12 months.
Other data will remind us of one of the big puzzle of recent months – the failure of inflation to rise in response to stronger economic activity. Friday’s US data could show that annual wage growth hasn’t moved much since mid-2016 (except for the odd blip) despite low unemployment. And eurozone data might show that core inflation is actually slightly lower than a few months ago. That should mean no rate rise in the region for many months.
