It is a short week - at least for the world’s financial markets, if not for the rest of us. But the Easter break often sets the tone for global economic trends later in the year. After a disappointing opening to the year, the past five weeks have seen reasonable recovery in spirits. The oil price has recovered, most equity markets are well up on their earlier lows, and in the US they are now talking more about another rise in interest rates in June. So will this more positive mood continue? Here are five things to look for this week, to give us some clues.
First, what will happen to the pound? There is now a huge speculative position being built up against sterling – I saw an estimate of £11 billion being staked against the pound. The reason of course is Brexit. Were the referendum vote to be a Leave, the consensus is that the pound would fall massively, perhaps to $1.15 against the dollar, or lower still. So people are placing their bets.
You may think this is disagreeable, but it is the world in which we live. So the thing to look for will be whether sterling fears mount in the next few days, and if they do, will that start to feed back into the voters’ minds.
Next, there will be some focus on our own economy. On Thursday, we get a wodge of data form the Office for National Statistics, including GDP figures and balance of payments figures for the UK economy for 2015. This will focus attention on two issues. Is the economy now slowing and are we living on the kindness of strangers – a phrase used by Mark Carney, governor of the Bank of England, to finance our current account deficit? The figures are likely to confirm what we pretty much know: that there is indeed a bit of a slowdown and that the current account deficit is more than 4 per cent of GDP. The interesting thing will be less the numbers and more how people react to them, because this will shift attention back to the costs of Brexit.
The third thing to look for will be US data on Friday. There is a lot of stuff, including the so-called non-farm payrolls, or employment, and the expectation is that these will show that the US economy is still creating jobs as a solid rate. Unemployment is expected to fall a bit. If that is right, and as pay and inflation are starting to nudge up, the case strengthens for a US rate rise. In any case, solid growth in the US is good news for the rest of us.
Fourth, there will inevitably, and sadly, be attention on how the terrorist attacks in Brussels will affect the European economy. Of course the economic impact pales into insignificance alongside human and geopolitical impact but it is worth saying that past experience suggests that the economic effects usually are short-lived. Even the sectors most hit, such as travel and tourism, recover reasonably swiftly.
Finally, something different. Did you know that the Tesla Model 3 is being launched on Thursday? The Model S has been massively successful. In the US it is the second most popular luxury car after the S-series Mercedes. It is gorgeous, but it is expensive: the price in the UK is £60,000 upwards. Now comes an affordable version, for this has been billed as the car that brings pure electric driving to mid-range purchasers. Think 3 Series BMW instead of 7 Series. If that is right, and buyers will decide, the start-up Tesla will give a huge push to pure electric motoring in a way that the established motor manufacturers, with all their resources and their OK models, such as the Nissan Leaf, have failed to do.Reuse content