ECONOMICS - THE WEEK IN VIEW

US economic reports this week are expected to show gains in manufacturing, factory orders and employment in March, which could prompt a second rate rise after last week's quarter percentage point hike to choke off economic growth and inflation. The next move could be as early as the Federal Reserve policy meeting on 20 May.

"I'm in the camp where I see more tightening moves ahead," said Eric Cheung, bond manager at Wilmington Trust.

The most closely watched report will be Friday's non-farm payrolls and hourly earnings. Analysts expect March payrolls to have risen by fewer than 200,000, below the 250,000 monthly average of the last five months. Wage growth, however, could show a relatively large gain of 0.5 per cent, reflecting the ever-tightening labour market. Such tight labour markets traditionally lead to inflation because, eventually, employers must bid up wages to attract scarce workers.

The momentum of economic growth seen in the fourth quarter of last year has continued in the first quarter, buoyed by factory activity, retail sales and job growth. By most analysts' reckoning, the US economy grew at about 3 per cent in the first three months of the year, though growth should slow towards 2 per cent by the end of the year.

So far price pressures have failed to spark. However, the spectre of inflation prompted the Fed to act pre-emptively last week. The Fed called its decision "a prudent step that affords greater assurance of prolonging the current economic expansion", now in its seventh year.

It was the first rate increase since January last year, even though the economy put in a stronger than expected performance during two of 1996's four quarters. Still, consumer prices increased only 2.6 per cent last year.

Central bankers said last summer they expected the economy to slow on its own, but six months later the unemployment rate continues to flirt with an eight-year low of 5 per cent.

In Germany, economists' forecasts for the second quarter are optimistic for a rebound in growth. Thanks to robust foreign demand, the economy is seen expanding 0.8 per cent on the quarter and by 2 per cent from a year ago, while inflation will remain capped by sluggish domestic sentiment.

"It's the export sector that's going to do it for Germany again," said Alison Cottrell, economist at Painewebber International. "But it's going to be a while before consumers prefer to spend rather than save."

Factories are reporting increased order inflow, business confidence is more upbeat and a weaker mark is brightening the outlook for exporters. Copyright: IOS & Bloomberg

PROMOTED VIDEO
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
Arts and Entertainment
The Tiger Who Came To Tea
booksJudith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed'
News
i100
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

Robert Fisk on Syria air strikes

‘Peace President’ Obama had to take stronger action against Isis after beheadings
Will Lindsay Lohan's West End debut be a turnaround moment for her career?

Lindsay Lohan's West End debut

Will this be a turnaround moment for her career?
'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

The follow-up to 'The Tiger Who Came to Tea'

Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

BBC Television Centre

A nostalgic wander through the sets, studios and ghosts of programmes past
Lonesome George: Custody battle in Galapagos over tortoise remains

My George!

Custody battle in Galapagos over tortoise remains
10 best rucksacks for backpackers

Pack up your troubles: 10 best rucksacks for backpackers

Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world