We’ll get more evidence next week of the impact the coronavirus lockdown is having on economies.
In the UK, the most dramatic sign of this could come on Thursday when the Office for National Statistics (ONS) reports a record collapse in retail sales, as the disappearance of non-essential retailing outweighs slightly greater food shopping. There’ll also be bad news from manufacturing, though, when the CBI reports a slump in orders and output expectations.
Tuesday’s figures will show that unemployment is rising, perhaps to around 1.5 million on the official count, but there’ll be around another two million out of the labour force who want a job. Perhaps a better measure of labour demand – total hours worked – will fall. These figures will refer to the first quarter of the year and so capture only the very early effects of the lockdown. Everybody agrees that joblessness will rise much further.
Inflation, however, is falling. This will be most evident in Tuesday’s producer price numbers. Thanks to the slump in oil prices, these should show that input prices have fallen by more than 6 per cent in the past 12 months. Partly because of this drop in costs, output price inflation has probably fallen to almost zero – and in fact, the price level has fallen since last summer.
Consumer price inflation is also likely to show a fall – to around 1.2 per cent, its lowest rate since late 2016. This figure will, however, be based in part upon statisticians’ guesswork as the lockdown prevents them gathering some data. Not that this matters much, because lots of items in the Consumer Price Index (CPI) basket are not being bought whatever their price.
Wage inflation might rise a little but only because of a mathematical effect: insofar as the low-paid are more likely to lose their jobs, the average pay of those still in work will rise. Future developments here are however uncertain: to what extent will mass unemployment push it down, and to what extent will mismatches between the jobless and future job vacancies help support it?
Overseas, we’ll see more signs of a collapse in output with the Philadelphia Fed’s survey and eurozone purchasing managers’ survey both reporting slumps.
We might, though, see glimmers of hope, The Philly Fed survey could show that firms’ expectations for future output are holding up well, whilst Germany’s ZEW survey could show that financial professionals’ optimism for the next six months is above average. Both point to some kind of post-lockdown recovery.
