The US economy is booming, in marked contrast to the eurozone, next week’s numbers could show.
On Friday, the first official estimate of US GDP could show that the economy grew at an annualised rate of around 5 per cent in the second quarter. That would be the third-fastest quarterly growth rate since 2000. Few, however, believe this pace to be sustainable, in part because it is likely to lead to higher interest rates.
By comparison, eurozone data is likely to be downbeat. Purchasing managers' surveys on Tuesday could show that growth in manufacturing is near a two-year low. And while services growth might pick up after a weak couple of months, it is likely to be slower than it was last year. Germany’s Ifo survey might paint a worse picture. It could show the weakest reading since 2010, in part because worries about a trade war are exacerbating a pre-existing slowdown.
This doesn’t mean things are disastrous. The National Bank of Belgium is expected to report that business confidence, while flat in recent months, is still quite high by historic standards. And the ECB’s monetary statistics on Wednesday might give us two reasons for hope. They could show that bank lending, especially to companies, has accelerated slightly in recent months and that the M1 measure of the money stock is growing strongly – by over 7 per cent year on year. The latter matters as it has been a decent lead indicator of output growth in recent years..
In the UK, meanwhile, we might see signs of faster growth. The first estimate of second-quarter GDP might show growth of around 0.3-0.4 per cent, after 0.2 per cent in the first quarter. This would be due in large part to a strong rise in retail sales; industrial production might be down in the quarter and construction only slightly up.
CBI surveys might reinforce this impression of a slight pick-up. The manufacturing survey on Tuesday might show strong domestic and export orders, although business confidence could be hit by fears of a trade war and uncertainty about Brexit. And Wednesday’s retailing survey might show a second month of good annual sales growth, thanks in part to nice weather. With real wage growth slow and households likely to want to rebuild their savings sometime, it is doubtful whether such growth is sustainable however.
