Look ahead: Consumers signal strength of major economies


By Andrew Kenney

Consumer sentiment around the world will give a hint this week of what’s ahead for some major economies. In China, new housing price data could foreshadow further government moves to cool the market, while US indicators of inflation will shed some light on the Federal Reserve’s wait-and-see stance on interest rates. In the UK, consumer price data may present central authorities with a confounding question. Later in the week, a US housing construction report will show whether there’s relief in sight for consumers in a market that may just be too hot.

Monday: Housing prices for new homes in China have risen for 20 consecutive months, but the gains have slowed this year, thanks in part to government limits on buying and selling. The release of the June report will show if the government has successfully intervened to stabilise volatile urban markets. Its ability to do so may influence its effort to connect outlying cities with Beijing through transit and other infrastructure.

Russia’s measure of industrial production will show whether the country can build on three months of gains. Sanctions and an economic downturn have for years put a damper on international interest, but Daimler now is working on a new auto factory in Russia.

Tuesday: A monthly report on import-export prices will give a sense of inflation in the US and abroad. US import prices fell 0.3% in May, a relatively steep decline partially caused by falling fuel prices. A continued decline could indicate weak inflation, a condition that Federal Reserve Chair Janet Yellen recently indicated could result in slower rate hikes.

A US Treasury report on the flows of financial instruments into and out of the country will detail investors’ interest in the US and vice versa. Last month’s release showed a net inflow of $65.8 billion to the US, showing a strong appetite abroad for US securities and supporting the value of the dollar. Capital inflows to the US have risen in the last four reports, and a fifth strong performance could predict a stable or gaining dollar.

The UK’s measure of consumer price inflation will provide finer grain for recent data showing inflation worries for the country. Two recent private surveys found that consumers were spending more on food and other essentials, but overall spending growth may be slowing amid rising prices. The weakening pound has led some Bank of England panel members to argue for higher interest rates, but faltering business confidence may mute that desire, especially given Brexit uncertainty.

Wednesday: The housing starts report will show whether the pace of US housing construction will decline for a fourth straight month. Continued slowing would chip away at a crucial part of the US economy. Wage and jobs gains may reverse the trend – but, if not, the housing shortage may worsen with ripple effects for consumers and employers.

Thursday: Weekly jobless claims data will show whether US unemployment stays near historic lows or once again ticks upward.

The Conference Board will release its monthly update of an index of leading US economic indicators, which has been positive for nine consecutive months. The index components include stock prices, jobless claims, orders for consumer goods, and more. By contrast, the Organisation for Economic Co-operation and Development has found “tentative” signs of a US slowdown.

An EU poll of consumer confidence will show how Brexit negotiations are playing both on and off the continent. Recent surveys have found UK consumers’ optimism to be slumping amid inflation and poor wage growth. However, overall economic sentiment in the EU as a whole has been trending upward.

Friday: Canada’s reports on retail trade and the consumer price index will show the health of the country’s consumer economy. The results may bear out some of the central bank’s reasoning in raising interest rates last week; strengthening inflation would add to expectations of a second increase later in the year. Inflation has been weak in recent months, but the Bank of Canada has blamed that on temporary factors.