We might see signs next week of a recovery in the world economy.
In the eurozone, official figures could show that industrial production was more or less flat in February after a big rise in January. This would be consistent with output having picked up from its late-2018 lows, although it remains well below the autumn’s level.
In the US, Friday’s data could show that job vacancies are at a record high – pointing to further falls in unemployment even from its current 50-year low.
And in China, we might see a further rise in annual growth in M1 money supply. Although not much reported, this is very important: such growth has for years been a good lead indicator of output growth in the country and hence for commodity prices. Such a recovery should therefore be welcomed by investors in commodity producers and emerging market equities.
The UK is sharing in this recovery. Wednesday’s data could show that real GDP grew by 0.3 per cent in the three months to February, slightly up from the 0.2 per cent we saw in January.
For now, however, such growth is not due to higher exports. Wednesday’s figures will probably show that the trade deficit in goods has increased recently, implying that net trade is subtracting from growth, and so the expansion is driven by domestic demand. Some of this is probably due to companies stockpiling goods as a precaution against the risk of disruptions to trade in the event of a no-deal Brexit.
One part of the economy that’s not sharing in this growth is the housing market. The Royal Institution of Chartered Surveyors (RICS) is likely to report that prices and demand are both falling. This isn’t wholly due to Brexit uncertainty: high valuations, higher taxes on buy-to-let landlords and weak real wage growth are also to blame. Because vendors are often slow to cut asking prices in a weak market, it often takes a long time for prices to fall. We might therefore see a long bear market in housing.
Better news will come from US inflation numbers on Wednesday. These could show that the core CPI inflation rate is around 2.1 per cent, meaning that it has moved sideways for the past 12 months. This would support the Fed’s recent promise not to raise rates for some time.
We’ll get the latest monetary policy announcement from the ECB on Wednesday. It’s likely to reiterate its promise not to change rates this year. Many economists, however, think it should do more to support the still-fragile economy.
