The eurozone economy is set to grow only slowly, next week’s figures could show.
One of the best lead indicators of output growth in the region is the annual growth in the narrow money stock. And the ECB could say on Thursday that this has slipped recently, to under 8 per cent. If past relationships between this and industrial production growth continue to hold, it points to only weak growth.
Germany’s Ifo survey might confirm this. Although it could show that manufacturers are doing a little better than a few months ago, it could also show that expectations are downbeat in part perhaps because of fears that the coronavirus epidemic will depress Chinese growth and hence German exports.
One partial side-effect of the weak economy, though, is that inflation is low. Friday’s figures could show that the headline rate has fallen slightly to 1.2 per cent, thanks to lower oil prices, while the core rate is also around 1.2 per cent. The latter has moved sideways since mid-2017. With both rates well below the ECB’s target rate (of just under 2 per cent) the possibility of further monetary easing is still on the cards.
Elsewhere, we might get better news. In Japan, official figures could show a third successive monthly rise in industrial production – although this will be before the adverse impact of the coronavirus. And in the US, we should see not only a rise in durable goods orders, but also a report from the Conference Board that consumer confidence is still near a 19-year high. Consistent with this, the housing market is reasonably robust. We should see that new home sales are high, and house prices have been rising, albeit gradually in recent months.
In the UK, meanwhile, the CBI is expected to report that retail sales were flat again in early February. This is despite the fact that GfK could report a rise in consumer confidence to an 18-month high.
The Nationwide, however, could say that annual growth in house prices has risen above 2 per cent for the first time in 19 months. This would corroborate other evidence (such as from the Halifax) that prices are firming up. However, this is due as much to a lack of supply as to increased demand. It might not, therefore, do much to boost consumer spending; what drives the latter is perhaps housing transactions more than the level of prices.
