The world economy is far from fully recovered from the pandemic, but there are some hopeful signs, next week’s numbers will show.
Eurozone numbers should show that industrial production rose again in August, although it is still well below pre-pandemic levels – which themselves were down from 2017’s peak in output.
Official US data should show a similar thing, with industrial output up strongly in the past three months, but still below pre-Covid levels. Retail sales data, though, should be stronger. They could hit a record high – although this would mean that in real terms they are less than 2 per cent up on a year ago.
We will, though, also see reasons for optimism around the world. In Germany, ZEW’s survey of finance professionals could show that optimism is at a 20-year high. In the US, the New York and Philadelphia Feds' surveys should show that optimism for output in coming months is well above its long-run average levels. And in China, annual growth in the M1 measure of the money stock could accelerate to over eight per cent. Its highest rate since early 2018. This matters, because this has in the past been a great lead indicator of output growth. Although its growth rate is not so high as to point to strong growth, it is moving in the right direction.
It won’t all, though, be good news. Tuesday’s UK employment numbers could show that over 700,000 jobs have been lost since the start of the pandemic. And with the furlough scheme ending later this month, everybody expects more job losses soon. Yet more workers face shorter hours: other data will show that total working hours are some 15 per cent down since the pandemic started. Because of this, wages are falling. They are likely to be one per cent down year-on-year. This means that in real terms wages are lower than they were in 2006.
It’s not just workers who are getting hurt. Other numbers next week could give equity investors a warning. The US Treasury is likely to report that non-Americans were huge buyers of US equities in the last 12 months. In the past, such buying has been a sign of excessively positive investor sentiment and hence a lead indicator that shares around the world will fall in the following 12 months. Granted, it is possible that this relationship is breaking down. But it is nevertheless a warning to investors to be cautious.
