The UK economy has been hit by the reimposition of the lockdown, next Friday’s figures will show. The ONS is expected to say that real GDP fell sharply in January, to its lowest level since June.
We’ll also see the first trade figures since the trade deal with the EU. These are highly likely to show a fall in both exports and imports. Imports are likely to drop by more simply because firms had stockpiled imported components in November and December as a precaution against disruptions at the ports. The upshot is that the trade gap, which had widened at the end of last year, will narrow again.
Sadly, however, it’ll be impossible to distinguish in these numbers between the impact of the lockdown and the impact of post-Brexit trade frictions. Indeed, given that the lockdown will continue for some weeks yet, and that monthly trade data are volatile and so contain a large ratio of noise to signal, it might always be difficult to do so. Evidence for Brexit damage comes more from abundant anecdotes and economic common sense than it does from official data.
In the eurozone, the main news will be that the economic upturn has stalled. Official figures are likely to show that industrial production was flat in January, having fallen in December. This will leave it 2 per cent down year-on-year. Even before the pandemic, however, output was weak: it was lower last February than it was in 2007.
In the US, figures will show that, for now, inflation is low. The headline CPI rate is likely to be stuck around 1.4 per cent, while the core rate is likely to slip to 1.3 per cent, its lowest since June. Both rates are likely to rise in the next few months simply because last spring’s collapse in oil prices will fall out of the annual inflation data then. Other than this, underlying inflation pressures are weak for now. That means the Fed is likely to keep rates near zero for a long time.
We could get some good news from China. Last month’s numbers showed that annual growth in the M1 measure of the money stock soared to 14.7 per cent, its fastest growth since 2017. If next week’s numbers conform this upturn, it would be a good lead indicator of an economic recovery in the country. That should be good for commodity prices and mining stocks, and for emerging market equities generally.
