Next week should bring signs of global economic growth.
In the US, Friday’s data should show that the economy created around 400,000 jobs in March, causing the unemployment rate to fall to just over six per cent – though this is still well above pre-pandemic levels. And the Conference Board should report an increase in consumer confidence, helped perhaps by the coming $1,400 stimulus cheques. Another factor behind increased confidence is the strength of the housing market: the S&P should report that prices are rising more than 10 per cent year-on-year.
Growth isn’t confined to the US, though. Purchasing managers are likely to report further growth in Chinese manufacturing, albeit modest. And in Japan official figures should show that industrial production has risen significantly in recent months, while the Bank of Japan’s Tankan survey should show that firms are enjoying improved trading conditions.
It might seem that this upturn is raising inflation. Official figures for the eurozone could show that this increased this month. This is, however, a mathematical artefact: oil prices fell sharply last spring but this fall is now dropping out of annual inflation numbers. The rate excluding food and energy is likely to be little changed at just above 1 per cent – well below the ECB’s target.
In the UK, we’ll get evidence of the scale of pent-up consumer demand. On Wednesday, sector accounts will show that households’ net lending hit a record high last year as the lockdown forced us to save more: big government borrowing is, by accounting identity, the counterpart to this. And Bank of England data will show growth of over 11 per cent in households’ bank deposits as well as a record repayment of consumer debt in the last 12 months.
In the housing market, some of this demand is being released already. The Bank of England is likely to say that there were almost 100,000 mortgage approvals in February: though slightly down on previous months, this is still close to the highest since 2007. Thanks to this, the Nationwide is likely to report that house prices have risen almost 7 per cent in the past 12 months.
Company finances, though, are mixed. Although the Bank is likely to say that firms’ bank deposits have risen 30 per cent in the last 12 months – thanks to the postponement of capital spending plans – this hides the fact that some firms are in trouble: the Bank will also report a 25 per cent-plus rise in the debt of small- and medium-sized companies.
