Next week should bring more evidence of a worldwide recovery.
In the UK purchasing managers’ final surveys should confirm the flash ones, which showed manufacturing activity rising at its fastest rate since the survey began in 1992 and services also doing well.
In the eurozone, those surveys should also confirm decent, but less spectacular growth. Official data in the region should also show a small rise in retail sales in April after a big jump in March, and a slight fall in unemployment to around 8 per cent.
But how long will the eurozone’s upturn last? Here, we might get slightly concerning news from the ECB’s monetary data. These could show that annual growth in M1 has slowed a little, from over 16 per cent earlier this year to under 13 per cent. This matters, as this has historically been a good lead indicator of output growth. For now, the numbers still point to an ongoing recovery – but this needs watching.
In China, purchasing managers should also report stronger growth – perhaps at the fastest pace this year.
We should see the same in the US, with them reporting strong growth in output and new orders, albeit not at quite the same pace as earlier this year. Employment figures should also show a huge rise in jobs after a disappointingly small increase in April – although the unemployment rate, at around 6 per cent, will still be much higher than its pre-pandemic low of 3.5 per cent.
Is this upturn generating inflation? In the US, purchasing managers will suggest so. They are likely to report rising prices and shortages of some key raw materials, and increasing backlogs of orders – things which in the past has led to more general inflation.
And in the eurozone, we could see a rise in CPI inflation to a little under 2 per cent – in line with the ECB’s target. The rate excluding food and energy is likely to stay under 1 per cent, however.
In the UK, Bank of England money data will show the impact of the re-opening of shops on household finances. These could show that the fall in consumer debt and rise in bank balances have stopped.
The numbers will also remind us that companies have had contrasting pandemic experiences. They’ll show that larger firms have paid off some debt but that smaller firms’ debts have risen more than 20 per cent in the last year. This could lead to a swathe of business closures in the next few months.
