Worries about US inflation might intensify next week.
Official figures could show that consumer prices rose by around 5 per cent in the past 12 months, the biggest increase since 2008. This won’t be all due to the rise in oil prices since last spring. The rate excluding food and energy could hit 3 per cent, its highest rate since the mid-1990s.
This is unlikely to elicit a swift response from the Fed. It will want to see that inflation is sustained and broad-based before raising rates, and so far it is unclear that this is the case: much of last month’s rise, for example, was due to a jump in used car prices.
Other US figures will confirm that the labour market is healing. They could show that the number of vacancies has hit a record high. Hiring rates, however, aren’t quite so spectacular, which is evidence that some employers are finding it hard to recruit staff.
In the UK, Friday’s figures will show how much the economy bounced back after April’s reopening. We’ll see a big rise in GDP powered by retailing and hospitality, but output will still be below its pre-pandemic levels.
We should also see a recovery in the eurozone, with France, Italy and Germany reporting rises in industrial production as Covid cases recede. In all three countries, however, output will be far below its peak levels – which in France and Italy were as long ago as 2007. The pandemic is distracting us from the longstanding weakness of the eurozone economy.
We’ll see the ECB’s response to this on Thursday. It will leave policy unchanged, but economists will watch out for how concerned it is about the possibility of rising inflation.
We’ll also get a note of caution about the likely pace of the global upturn. The People’s Bank of China is likely to say that the M1 measure of the money stock has grown by about 7 per cent in the past 12 months. This matters because this has been a good lead indicator of output growth and commodity prices. For now, it is pointing to only a moderate expansion – which warns holders of mining stocks to be cautious.
Back in the UK, the Halifax is likely to report further rises in house prices – up by around 9 per cent in the last 12 months. This is driven by the stamp duty holiday, mortgage guarantees, a lack of supply and some now-fading pent-up demand. This is, however, probably unsustainable given a lack of affordability and the likelihood that the ending of the furlough scheme might well raise unemployment.
