Next week’s numbers might challenge economists’ optimism about the economy.
If Wednesday’s CBI survey is in line with retailers’ expectations, it’ll show that sales were weak for the time of year in April. This could undermine economists’ hopes that consumer spending will be sustained this year by falling savings. Granted, Bank of England data could show a rise in credit card debt and slower growth in households’ bank deposits, but this could be because people are borrowing to buy essentials rather than increasing spending generally.
We’ll also get mixed signals from companies. On the one hand, the CBI’s survey on Monday could say that output expectations are still healthy, in part thanks to an easing of supply constraints. But it could also show a big fall in business confidence as a result of rising energy costs. And Bank of England data could show that companies are still not borrowing much, which casts doubt upon economists hopes for a big rise in capital spending this year.
Where we will see strength is in the housing market, with the Nationwide likely to say that house prices are 14 per cent up on last year. This, however, is unlikely to be sustainable given rising mortgage rates, a lack of affordability and increased uncertainty. And sure enough, Bank of England data should show that mortgage approvals have flatlined recently.
In the eurozone, meanwhile, we’ll get more grim inflation news, with CPI inflation likely to exceed 8 per cent due largely to soaring energy costs. There’ll also be bad news about output growth. ECB data will show that growth in the M1 measure of the money stock has slowed, especially adjusted for inflation; historically, this has been a good lead indicator of slower economic growth a few months later.
The US economy is also slowing. The first official estimate is likely to show that real GDP grew at an annualised rate of a little over 2 per cent in the first quarter, after 6.9 per cent in Q4. For now, though, some growth should be sustained. Other figures in the week should show that durable goods orders are rising and that consumer confidence, while below its pre-pandemic peak, is still above its 2010-2019 average.
The US’s housing market is, however, coming off the boil. S&P could report a slowdown in house price inflation from a whopping 19.2 per cent last month while official data should show that sales of new homes are slowing. With mortgage rates rising, such a slowdown is to be expected.
