Next week will bring evidence on the impact that coronavirus lockdowns are having on the world economy – and we could see some records broken.
In the US, official figures on Friday could show that millions of Americans lost their jobs in April, pushing unemployment up to its highest rate since 1940. Next month could see yet another rise.
In the eurozone, official figures could show huge falls in industrial production in March in France, Germany and Italy – especially the latter as the lockdown started earlier then. These will more than reverse the tentative recovery that had been under way before then. Retail sales data for the eurozone will tell a similar story. These will fall, as the slump in non-food shopping outweighed the rise in food sales.
Purchasing managers’ surveys in the week will show that these falls actually intensified in April.
In the UK, purchasing managers will tell a similar story with activity collapsing in April in manufacturing, services and construction.
The Halifax’s index of house prices will hold up better, but this is only because an absence of demand is matched by an absence of supply. Of more interest is the longer-term impact the lockdowns will have on prices. Higher unemployment, plus the reminder that housing is an illiquid asset, could well depress them.
Better news could come out of China. Last month’s purchasing managers survey showed that output stabilised, having fallen sharply in March. This month’s survey, however, could show that while the ending of the lockdown tended to boost activity, falling demand from the rest of the world depressed it.
On Thursday, we’ll get the Bank of England’s judgement not only on how much the lockdown will depress activity but also how it will bounce back. It is likely to tell a similar story to the Office for Budget Responsibility, forecasting that output will recover strongly next year, but that unemployment will take much longer to fall back to last year’s levels.
Their assessment of the inflation outlook will also be interesting. On the one hand, lower oil prices and higher unemployment should reduce inflation. But on the other, the recession will perhaps create a mismatch between supply and demand, perhaps causing inflationary bottlenecks in some sectors when the lockdown is lifted.
