Economic data: officially OK so far in 2018
Gavyn Davis and his colleagues at Fulcrum with their global Nowcast have been consistently more upbeat and more accurate than most forecasters of late and the latest batch of official data certainly does not contradict them. It has to be said, however, and somewhat unhelpfully, that there is increasing doubt over the methodology national statistical organisations use to collate their data on GDP, employment and inflation with the implication that all is not as well as published. Nevertheless, the various confidence indices in the US, especially consumer and small business, are at or near long-term highs while the Labour Market charges on with more people in or looking for jobs and plenty of job vacancies. The ‘hard’ economic data in the first quarter can, in fact, be quite soft in the US and this may explain the current run in Retail Sales but business activity seems to be going well enough. In contrast, China continues to churn out very strong numbers while even the official confidence surveys seem surprisingly ambivalent at a time of President Xi’s enthronement. Investors are going to have to look more carefully at China once stocks listed in Shanghai and Shenzhen are included in the MSCI Emerging Markets Indices. Japan’s and the Euro Area’s economies continue to chug along without ever quite taking off and inflation still very subdued. Out of step with them all is the UK economy with slowing GDP growth, subdued consumption and business investment and an almost blasphemous slump in house prices in London and the South East. Twisting in the Brexit wind may be as good a description as any and this week should provide some better news on inflation and public finances. Given Mr Carney’s latest fulminations on Brexit (he is obviously not looking to be re-appointed) the MPC on Thursday is more to talk the talk on interest rate hikes rather than walk the walk yet.