Next week will bring signs of economic growth, but also rising inflation.
On Monday, the Office for National Statistics is likely to say that real GDP increased in February, with production still surpassing its pre-pandemic peak.
labor market Data the next day should corroborate this picture, showing a further rise in employment. Unemployment data, however, will be flattered by the fact that the labor force is shrinking: some 300,000 older people have left the labor market since the end of 2019. And labor demand, measured by hours worked, should still be around 2 percent. cent below its pre-pandemic peak.
Inflation, however, continues to rise. Wednesday’s numbers could show the CPI inflation rising to about 6.5% due to rising food prices and rising gasoline prices. There will, however, be a much larger jump next month due to the spike in utility bills in April. We will also see increases in the prices of manufacturing inputs and outputs due to rising oil and other commodity prices.
Wages, however, are not keeping pace with prices. Tuesday’s figures will show average revenue growth of around 5%, confirming that real incomes are being squeezed. The Office for Budget Responsibility thinks consumers will respond by cutting savings to keep spending real. If this is wrong, economic growth will soon run out of steam.
We will see a similar picture in the United States. Friday’s official figures are expected to show an uptick in industrial activity production in March, leaving production up 1.8% from the quarter. However, the New York Fed investigation the same day is likely to repeat that prices are still rising sharply. This inflation could dampen consumer spending. Although Thursday’s figures could show a rise in the nominal retail sales, largely because Americans are paying more for what they call gasoline; spending volumes may well slow down.
In the eurozone, Wednesday’s figures could show a slight increase in industrial activity production in February. However, it is doubtful that such strength can be sustained in the face of rising energy costs since then. germany ZEW survey is likely to show finance professionals have become much gloomier about the economy.
We may, however, have a glimmer of optimism from China, where annual growth in the M1 measure of money the stock could rise more than 5 percent. This is important because in recent years this growth has been a leading indicator of output growth, which would indicate less weak growth in the economy.