Much of the world economy is recovering, but it is far from fully healed next week’s numbers will show.
In the US, the ISM survey should show that manufacturing activity is expanding nicely, with order and output rising. This will fit with evidence from other areas. In China, purchasing managers could report that manufacturing growth is close to a nine-year high. In Japan, official figures should show that industrial production has risen nicely in the last five months. And in the eurozone purchasing managers should confirm that manufacturing continues to grow, albeit at a slower rate than in recent months, while official data should show a rise in retail sales in October: these are now actually above pre-pandemic levels. However, purchasing managers might also confirm that the services sector generally is shrinking again.
Such good news will, however, be tempered by unemployment data. In the US, while Friday’s figures should show another rise in payrolls and fall in unemployment, the official unemployment rate will still be way above its pre-pandemic low – at over 6 per cent compared with 3.5 per cent. A better measure of labour market slack – the U6 rate, which includes those outside the labour force wanting a job and part-timers who’d like a full-time job – will be over 12 per cent.
And in the eurozone, the jobless rate could rise again, to over 8.5 per cent of the workforce – more than a percentage point above its pre-pandemic level.
Such unemployment is, however, having one benefit in the eurozone. It is holding down inflation. Next week’s numbers could show that the overall consumer price index is lower than a year ago. And even excluding food and energy, the rate is only around 0.5 per cent whereas it was over 1 per cent before the pandemic. This means the European Central Bank should not need to worry about inflation, and can focus instead upon reflating the economy.
In the UK, however, things are worse. Purchasing managers will confirm that economic activity has fallen this month due to the lockdown: economists estimate that GDP in November will be 6-7 per cent down from October. How quickly this fall will be reversed after the national lockdown is lifted is, however, still very uncertain.