To what extent are Americans spending their $1,400 (£1,006.05) cheques from the government? We’ll get clues in next week’s official retail sales numbers. With spending also bouncing back after being depressed by February’s storms, we could see a very sharp rise indeed.
This won’t be the only encouraging news. Industrial production should also post a bounceback after February’s fall. And the New York and Philadelphia Feds’ surveys of manufacturers should show both strong growth and high optimism for coming months.
All this will be consistent with economists’ expectations for strong growth this year: the OECD, for example, expects real GDP to rise by 6.5 per cent, its biggest increase since 1984.
For now at least, this contrasts with the UK. Tuesday’s numbers should show that real GDP was little changed in February after January’s fall. That will leave it some 9 per cent down on last February (just before the pandemic struck us); within this, the restaurant and hotels sector is down almost 70 per cent.
The eurozone is also doing badly. Retail sales could dip slightly in February after a big fall in January, thanks to rising cases of Covid-19. This would leave them almost 10 per cent lower than in October. Industrial production might be slightly healthier, rising slightly in February to leave it up since the autumn. But this would still leave it below pre-pandemic levels which had themselves been stagnant for months.
We’ll also get important figures next week from the People’s Bank of China on monetary growth. Last month’s numbers showed a steep drop in M1 growth. That matters, because this has for years been a great lead indicator of economic activity in the country and hence of demand for commodities. If monetary growth stays low, the question will emerge of whether the US’s boom really will greatly stimulate activity elsewhere in the world. That should worry investors in miners and emerging markets, as these sectors might be pricing in more growth than we will actually get.
Watch out too for US capital flows numbers. These are likely to show further heavy buying of US equities. Historically, this has been a sign of excessive optimism about equities generally and hence a lead indicator of falls in share prices globally. It’s possible, though, that this link has broken down, perhaps because investors regard stocks such as Apple and Amazon as safe havens. If this isn’t the case, equity investors are in trouble.
