Next week could bring signs that global economic growth is slowing a little.
In the US, the ISM survey could show that manufacturing output is being held back by shortages of materials, and that consumer confidence has fallen (albeit from high levels) since the summer. In China, purchasing managers might report that output is now stagnating. In Japan, although industrial production should post a rise, the Tankan survey is likely to report that firms’ business conditions are no better than they were in 2018. And in the eurozone, the ECB is likely to say that the M1 measure of the money stock has slowed in recent months. This matters as it has traditionally been a good lead indicator of output growth. Eurozone data will also show that the unemployment rate, at around 7.5 per cent, is still well above its pre-pandemic low of 7.1 per cent.
We might see a similar story in the UK. The Bank of England could report that consumer credit has been weak in the last two months, following a post-lockdown surge. This corroborates the message from official retail sales data, suggesting that the post-lockdown increase in demand has not been as strong as some expected.
Although economic activity is cooling, housing markets are not. In the US, the S&P/Case-Shiller index of house prices could post an annual rise of around 20 per cent, its biggest year-on-year rise ever. This will fuel concerns about what will happen when interest rates rise.
In the UK, the Nationwide is likely to report an annual increase in house prices of around 11 per cent, reversing the signs of a cooling off in the summer. In part, this reflects a lack of supply. This could be reflected in Bank of England data on mortgage approvals, which could show that these have fallen since the spring.
We’ll get some important readings on inflation next week too. The ISM survey might confirm last month’s finding that price pressures – while still strong – are easing off a little. That’ll support the Fed’s idea that inflation is transitory and will drop back as supply shortages ease.
And in the eurozone, CPI inflation could dip a little from last month’s 3 per cent – which was boosted by the fact that petrol prices were abnormally low last summer. We should watch out for the core measure though, which excludes food and energy. Last month it jumped to 1.6 per cent, close to the ECB’s target. A further rise would be worrying, partly because the ECB does not seem as relaxed about inflation as the Fed or Bank of England.
