We could see signs of global economic growth next week.
Official figures could show that industrial production in the eurozone rose slightly in March, which would imply that output rose by 0.8 per cent in the first quarter. The level of production, however, is still lower than it was in the autumn.
In the US, official figures should show small rises in both retail sales and industrial production in April – although the latter might still be below December’s levels. Surveys by the New York and Philadelphia Feds should confirm the picture of ongoing growth. Unless these surveys reverse last month’s story, however, they’ll show that manufacturers’ economic optimism has fallen recently, which points to slower growth later this year.
We’ll also see signs of growth in the UK. Tuesday’s numbers could show that unemployment has fallen again to just over 1.3m, or 3.8 per cent of the workforce – the lowest rate since 1974. Total hours worked – a better guide to overall labour demand – might also post a big rise in the first quarter. However, this would imply that labour productivity fell in the first quarter and is only slightly higher that it was just before the 2008-09 recession.
This drop in productivity, allied to the fact that there are also 1.8m people out of the labour market who want a job, will explain another feature of Tuesday’s figures – that wage growth has stopped rising. The ONS is likely to report that average earnings rose by 3.5 per cent in the year to the first quarter, the same annual increase as we saw at the end of 2018.
In this context, Friday’s retail sales numbers will be important. These rose very strongly in the first quarter, and might be supported in April by the later Easter and nice weather as well as by increased employment. This will remind us that retailers’ problems are over margins, not aggregate volume growth. Whether such growth can be sustained if wage growth remains moderate is, however, doubtful.
Perhaps the best news of all for investors, however, should come in Wednesday’s capital flows data from the US Treasury. Last month, these showed record net selling of US shares by foreign investors over the previous 12 months – next week’s figures are unlikely to be very much different. This is a sign of depressed investor sentiment and hence a lead indicator of rising share prices over the next 12 months.
