The US economy is recovering from the pandemic, next week’s numbers could show.
Official figures should show that retail sales rose in October to a record high, and are well up on a year ago even excluding online retailing. That means traditional retailing has returned to its – albeit shaky – former health.
Industrial production should also post a small rise. Here, though, the picture is less good. Output is likely to have flatlined since July, at a level some 8 per cent below the pre-pandemic peak.
Surveys from the New York and Philadelphia Feds – conducted after the presidential election – might however be more encouraging. These should show current activity growth around normal, with companies’ expectations for output in coming months perhaps a little above their long-term average. This is evidence that monetary and fiscal stimuli are working to mitigate the virus’s impact.
In the UK official figures could show that retail sales slipped back in October due in part to local lockdowns – although they should be around 4 per cent up on a year ago. GfK’s survey of consumer confidence might be more downbeat, however. It could show confidence is close to the lows it hit in the spring and in 2009. This pessimism, however, is mostly about the general economic situation; people are much more optimistic about their personal circumstances – and it is this that drives spending.
Friday’s figures will remind us that the economy is getting massive government support. They will show government borrowing so far this year of around £240bn, over a fifth of GDP, and that the debt-GDP ratio has risen to its highest since 1960. With bond yields so low, however, such borrowing is sustainable for now – not least because it is the counterpart of huge domestic savings.
Nor is inflation a problem. Although Wednesday’s figures might show that CPI inflation rose a little last month to around 0.7 per cent, this will be due to falls in food and petrol prices last October dropping out of the index rather than to new inflation. Indeed, in the manufacturing sector there is deflation. Tuesday’s figures will show that both input and output prices are lower than a year ago – although both have risen from May’s lows. Such numbers mean the Bank of England is right not to worry about inflation, and to focus instead upon supporting the economy.
Watch out too for US capital flows numbers. These could show that foreigners have been huge net buyers of US equities recently. Historically, this has been a lead indicator of prices falling as it is a sign that sentiment is too high. This relationship might have broken down now – but you’d be brave to bet a lot on that.
