The US economy is doing much better than the UK or eurozone, next week’s numbers could show.
On Monday, the ISM is likely to say that the manufacturing sector is still growing nicely, albeit perhaps not quite as rapidly as at the end of last year. And on Friday, official figures should show that the economy created many more jobs in February, pushing the jobless rate down to around 6 per cent.
Those same figures will also show that there’s plenty of room left for further growth, however. They’ll show that the ratio of employment to population, while up from April’s low, is still under 58 per cent. Apart from last year, this is lower than at any time since 1983. Which tells us there is plenty of capacity left in the labour market.
The UK and eurozone, on the other hand, are doing less well. Final purchasing managers’ reports are likely to confirm flash estimates that showed the services sector shrinking in both economies, with manufacturing also contracting in the eurozone, though not in the UK. This picture might be reinforced by official numbers on eurozone retail sales, which could show these falling back since the autumn.
We might also see signs of a slippage in the UK’s housing market. The Bank of England could report a fall back in mortgage approvals, having hit a post-2007 high in November and December. And the Halifax could report that prices fell again in February, pushing annual price inflation below 5 per cent. This would confirm economists’ suspicions that prices were boosted last year by the release of pent-up demand and the stamp duty holiday, effects which are now fading away. It’s likely that rising unemployment will hold prices down this year – unless the government does something more to inflate the market.
Bank of England data on Monday will also be important. These will show that, in aggregate, the pandemic improved household finances. Consumer debt has fallen in the last year and households’ bank deposits have grown more than 10 per cent – the fastest rate since current records began in 2000.
The impact on corporate finances, however, is more mixed. The figures should show that while large companies have paid off some debt in the past 12 months, smaller firms have incurred much more. Consistent with this, other figures will show big rises in both corporate cash holdings and corporate debt. This tells us that strong balance sheets for some co-exist with distress for others.
