Is the eurozone economy slowing down? We’ll get a clue on Thursday from flash purchasing managers’ surveys.
These might show that manufacturing growth has slowed, perhaps to its lowest rate since November 2016. This would be consistent with the National Bank of Belgium’s measure of business confidence, which could fall to a 10-month low. One cause of this is concern about the trade war with the US. This, however, is not the only factor: purchasing managers might also report a slowdown in growth in the services sector.
However, interpreting this is complicated by the fact that these surveys have recently been stronger than official data. So far this year, for example, the latter show that the level of industrial production has fallen, while surveys tell us that activity has been rising, just slightly less so than last year.
This slowdown is affecting the UK. The CBI could say next week than export orders have slowed down (although they are still healthy by historic standards) and that output expectations have cooled as a result. However, it could also report that domestic orders are holding up well – which is a little odd, given that last month’s survey showed that investment intentions are still weak.
We’ll also get news on retail sales from a CBI survey. If this confirms last month’s expectations it will show sales in the first half of August were more or less flat on a year ago. This will remind us that, despite some evidence of an upturn in sale since March, the sector still faces huge problems – not least of which is that real wages are barely growing at all, so households don’t have the cash to raise spending much.
In the US we should see evidence of an ongoing expansion of manufacturing, with durable goods orders expected to post another rise: these numbers are, however, volatile.
Figures from the housing market, however, might be lacklustre, Although sales of pre-owned homes might rise, this would only slightly reverse three successive monthly declines and leave sales no higher than a year ago. This might be the first sign that perhaps the economy is starting to cool off.
Watch out too for the start of the annual get-together of central bankers in Jackson Hole, Wyoming. This will see debate about US interest rates: will a strong economy and fiscal looseness raise them a lot, or will ongoing secular stagnation continue to hold down 'equilibrium' rates?
