The world economy is recovering from the lockdown, but UK unemployment is rising, next week’s numbers could show.
On Wednesday, the ONS should report that UK GDP rose sharply in June as the lockdown was partially lifted. However, this would still imply that GDP fell by perhaps more than 15 per cent in Q2, and that in June alone it was still well below pre-Covid levels.
We’ll see a similar picture in the eurozone. Official figures will show a big jump in industrial production in June, but this will leave output down around 15 per cent in Q2, and still below pre-Covid levels. The ZEW’s survey of finance professionals in Germany will reveal levels of optimism well above average, pointing to a further upturn. Sadly, though, even before Covid, its predictive powers were limited.
In the US, we should also see a good rise in industrial production in July – although again, the level of output will remain below pre-pandemic levels.
Retail sales data, though, might have fully recovered. For now, though, this might be a little misleading. Bars and restaurants are still shut in some states, meaning that demand has shifted to shops. Also, some of the rise in recent weeks might have been one-off – people buying goods they couldn’t get when the shops were shut. We can’t yet say, therefore, how sustainable sales actually are.
We might also get good news from China, where the central bank could report that growth in the M1 measure of the money stock is accelerating, to perhaps around 7 per cent. In normal times, this has been a lead indicator of recoveries in output.
UK data, though, will also contain some bad news – that unemployment is rising. Granted, the headline numbers might show only a moderate increase, to perhaps around 1.5 million in the second quarter. However, more timely PAYE data should show that more jobs were lost in July. Also, the numbers of people outside the labour force who would like a job are rising: last month’s data showed there were 2.1 million of these, a rise of a quarter of a million from pre-pandemic levels.
The numbers will also show that average weekly earnings are falling as hours are being cut even for those who keep their jobs.
Such figures will cast doubt upon how quickly the economy can continue its upturn, because higher joblessness and falling wages represent a big loss of potential spending power.
