Next week will bring more evidence of the economic damage done around the world by coronavirus lockdowns.
In the eurozone, we could see the National Bank of Belgium’s measure of business confidence and Germany’s Ifo survey both close to record lows. Worryingly, the latter might show that expectations for future activity have fallen almost as much as current trading conditions.
In the US, we could see a second successive huge fall in durable goods orders, and a third successive monthly drop in consumer confidence – although whether the latter tells us anything that rising unemployment does not is doubtful. Thursday’s numbers will also confirm that real GDP fell sharply in the first quarter – at an annualised rate of almost 5 per cent. They could also show that corporate profits took a big hit, although it’s possible that increased government borrowing will contribute to a huge recovery in profitability when the lockdown ends.
In the UK, the CBI will report a big drop in retail sales in early May while GfK is likely to say that consumer confidence stayed depressed in the month. Consumers’ expectations for their own personal finances, however, are holding up better than those for the general economy – which should be comforting given that they know more about the former than the latter.
Despite all this, there might also be some glimmers of hope next week.
If Japan’s industrial production data confirm last month’s expectations, they’ll show a small rise in output – helped perhaps by exports to China as its lockdown eased.
In the eurozone, European Central Bank (ECB) data should show a big rise in the M1 measure of the money stock. In normal times, this would be a lead indicator of stronger growth. They should also show a rise in bank lending to companies. This will be largely because companies stepped up borrowing to cover the loss of income caused by the lockdown – although it might also be evidence that the ECB’s policy of subsidising bank lending is working.
Other figures from the eurozone will show that inflation has fallen to almost nothing, thanks in part to falling oil prices. The inflation rate excluding food and energy, however, might also fall to around 1 per cent: its target is just under 2 per cent. With inflation no problem, the ECB can thus focus all its efforts upon supporting the economy.
