Next week should bring more signs of a worldwide upturn.
In the US consumer confidence could post another rise, meaning it has returned to pre-pandemic levels which were themselves near a 20-year high. One reason for such confidence is that house prices are soaring: S&P could report that they’ve risen 15 per cent in the last 12 months.
In Japan, official figures should show a jump in industrial production last month, albeit after a big fall in May.
And in the eurozone, Germany’s Ifo survey could show improvements in both current trading conditions and business expectations – taking both to pre-pandemic levels – while the National Bank of Belgium’s measure of business confidence might rise to a 15-year high.
There will, however, be a note of caution from the region. The ECB is likely to report that growth in the M1 measure of the money stock has slowed. This matters, because such growth has historically been a great lead indicator of economic growth. While it is still high enough to point to decent growth, it is a warning of a modest slowdown later this year.
On the other hand, though, Friday’s inflation data from the region should be encouraging. They could show a slight dip from last month’s 1.9 per cent as the base effect of low oil prices last year fades away. The inflation rate excluding food and energy should be little changed at just under 1 per cent. Which means interest rates will stay low for a long time.
In the UK, the main news will be on how households are responding to the easing of the lockdown. The CBI will report that retail sales are good for the time of year. That’ll be consistent with Bank of England data showing that households are now taking on more debt, having repaid some during the pandemic. Companies, though, are repaying debt as the re-opening of the economy has improved their cashflows.
Meanwhile, the Nationwide will report that house price inflation touched 14 per cent, its highest since 2004. However, the Bank of England could report that mortgage approvals have dropped a little in recent months. That’s because of the easing of pent-up demand, the fading effects of the stamp duty holiday and a shortage of properties for sale.
Finally, watch out for the Federal Reserve’s announcement on Wednesday which will tell us how concerned it is by the recent jump in inflation. The answer might well be: not much. It will probably repeat its promise to tolerate high inflation for a while, in the belief that this is only temporary.
