The US economy is booming. Next week’s numbers could show another rise in retail sales, partly as some more of President Biden’s stimulus cheques are spent. This would mean that sales in April were 50 per cent up on last April, and almost 15 per cent up on their pre-pandemic peak. Industrial production numbers will be less spectacular – output will still be below the December 2018 peak – but even this will post a second successive decent monthly rise.
Inflation, however, will also be up. In fact, the headline annual rate might exceed 3 per cent for the first time in almost 10 years. This, though, will be largely due to last April’s slump in oil prices falling out of the annual data. The core inflation rate – which excludes food and energy – is likely to rise to only around 2.4 per cent, which is what it was for much of 2019. It will be some months before we know whether and to what extent President Biden’s stimulus has been inflationary.
In the rest of the world, however, the numbers won’t be so spectacular. Official eurozone data should show a rise in industrial production in March, but that will only reverse February’s fall and leave output well below pre-pandemic levels.
And in China, the M1 money stock could show annual growth of around 8 per cent, roughly the same rate we saw in the autumn. This predicts only a weak upturn in output – and hence in demand for commodities.
In the UK the ONS is likely to report that GDP edged up a little in March, but this would imply that it fell around 2 per cent in the first quarter (Q1) as a whole due to the lockdown: both consumer and business investment are likely to have been well down. With economists expecting a big recovery in Q2, however, this shouldn’t trouble anyone much.
Trade figures could show a widening deficit, as exports fell more than imports in Q1. It is, however, almost impossible to distinguish between the effect of the lockdown and that of Brexit in these numbers, which are volatile from month to month even in the best of times.
The Halifax is likely to report a pick-up in house price inflation, perhaps to over 7 per cent. This reflects government support for the market through measures such as the stamp duty holiday and mortgage guarantees as well the release of pent-up demand. Such an increase is probably not sustainable.
