The world economy is enjoying non-inflationary growth, next week’s numbers could show.
This should be most evident in the US. On Monday, the ISM should report that manufacturing is still growing, albeit at a slower pace than in the autumn. And on Friday, official figures should show that the economy created another net 200,000 jobs in May, possibly pushing the unemployment rate down to a 50-year low of 3.5 per cent.
This is not, however, stoking up inflation. In fact, other figures on Friday should show that annual growth in average private earnings is just 3.3 per cent, implying that it has flatlined since last October.
We might also see signs of recovery in China, where purchasing managers could show that manufacturing is growing – albeit slowly – having stagnated in the winter.
In the eurozone, official figures should show that German industrial production and orders are both now rising – although the latter are still likely to be some 5 per cent below the autumn’s peaks. We should also see a rise in French industrial production and small increase in retail sales across the eurozone. And the region’s unemployment rate might drop to 7.6 per cent, its lowest rate since 2008.
Inflation, however, is not yet a problem here either. Although Tuesday’s figures might show that both core and headline consumer price inflation rates have risen so far this year, the core rate – at around 1.4 per cent – remains well below the ECB’s target of just below 2 per cent.
A lack of concern about inflation should be evident in Thursday’s ECB press conference. While ECB president Mario Draghi is likely to repeat his claim that inflation pressures are “gradually rising” he should also confirm that he expects to keep interest rates down until at least next year.
In the UK, purchasing managers are likely to report weak activity in both construction and services, in part due to Brexit uncertainty: this is encouraging firms to delay investment until some of the fog lifts, which is especially bad for capital spending and construction. Manufacturing, however, might be a little stronger as a slip-back in stockpiling caused by fears of a no-deal Brexit could be offset by a pick-up in export orders on the back of a slight strengthening in the eurozone.
We’ll also get news on house prices from the Halifax. Its measure of prices has been very volatile lately. But next week’s numbers could show annual growth of around 3 per cent. This is a little higher than the Nationwide’s reading. But as this is due to a lack of supply more than to decent demand, it is no evidence of strength in the market.
