We’ll get more evidence next week of the economic damage done by measures to contain the coronavirus. Purchasing managers in China should report a second successive big monthly drop in manufacturing activity. Official Japanese data could show a fall in industrial production in February, reversing the gains of the previous two months. All this is likely to have hit the US too, where the ISM survey could show that manufacturing activity is now falling.
US figures on Friday could show a small drop in jobs, pushing the unemployment rate up from its post-1968 low of 3.8 per cent. This will, however, be a false comfort as the numbers won’t fully reflect the impact of lockdowns in leading to layoffs of bar and restaurant staff. Next month's figures are expected to be terrible.
What the numbers will confirm, though, is that apparently low unemployment is not raising wage growth. At 3 per cent, annual wage inflation will be lower than a year ago.
UK data will show that the economy was weak even before the virus hit. The Office for National Statistics (ONS) should confirm that GDP growth was weak at the end of last year. One reason for this, it will say, is that business investment fell – and in fact, it has flatlined since 2016: this is one reason (of several) why labour productivity growth has been so poor. Consistent with this, the Bank of England is likely to report that bank lending growth to companies has dropped back recently.
Its figures will, however, provide some comfort. They’ll show that companies’ cash holdings have risen enormously since the 2009 crisis, which means many are well placed to survive a loss of cashflow – although whether the cash-rich firms are the same as the worst-hit ones is doubtful.
We might, though, see one area of pre-crisis strength. Bank of England data could show a second successive monthly rise in mortgage approvals. This would be consistent with recent data on house prices which suggest that the housing market firmed up a little before the crisis.
We’ll get another reminder next week that inflation at least is no problem. Eurozone data should show that Consumer Price Index (CPI) inflation fell to around 1 per cent this month thanks in part to lower oil prices. The core rate should also dip to around 1.2 per cent. Both rates are well below the ECB’s target rate, which implies that monetary policy has been too tight.
