The world economy is ending the year is decent shape, forthcoming figures should show.
The CBI is likely to report on Monday that manufacturers are enjoying strong orders, albeit with difficulties fulfilling them because of supply constraints, and have seen their inventories drop to near-record lows. This augurs well for the economy in early 2022, as companies will step up production not just to meet demand but to replenish stocks.
In the US, Thursday’s numbers should show a rise in durable goods orders, which points to rising output in coming months. That picture should be reinforced by the Conference Board’s report after Christmas which should show that whilst consumer confidence has been flat recently it is still well above its longer-term average – which suggests that consumer demand will hold up well.
In Japan, we should see a second successive monthly rise in industrial production, after big falls in the late summer, which could suggest that supply constraints are starting to ease.
And in the eurozone, the National Bank of Belgium should report that business confidence, whilst a little lower than in the summer, is still above its long-term average, which predicts decent growth for the eurozone as a whole. This picture might be slightly tempered by news from the ECB that narrow money growth – traditionally a good lead indicator of economic growth – is slowing down, especially adjusted for inflation. But even it still points to decent(ish) growth for now.
One uncertainty, however, concerns the UK consumer. The CBI reported that sales were strong in November. But was this because of a genuine increase, or simply because many of us, fearing shortages, began our Christmas shopping earlier? Tuesday’s survey of what happened in early December might tell us.
National accounts data on Wednesday will also be significant. These could show that the households’ savings ratio stayed high in the summer even as the lockdown was lifted and that companies also were net lenders, with retained profits exceeding capital spending. The counterpart to this, as a matter of accounting identity, is big government borrowing: Tuesday’s numbers will show net borrowing of around £140bn so far this financial year. That borrowing will decline only to the extent that household and corporate net lending do so.
We’ll also see signs that the US housing market is coming off the boil, with sales of pre-owned houses leveling off in recent months and the S&P reporting a decline in annual inflation to under 19 per cent.
