Is US economic growth slowing?

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U.S. growth data on Thursday will provide the latest clue to investors anxious for signals about when the Federal Reserve will begin to cut interest rates from their current 23-year highs.

Economists polled by Reuters expected GDP to grow at an annual rate of 1.8 percent in the second quarter. While that’s a slight pick-up from the first-quarter rate of 1.4 percent, the bigger picture for the world’s largest economy remains a slowdown from the rapid growth seen at the end of last year.

„We expect . . . a slight slowdown in consumer spending, and a little more momentum in terms of business investment,” said Gregory Dago, chief economist at EY Parthenon. „It’s a very mixed picture, but shows an overall decline in the economy on a year-over-year basis.”

The data follows recent evidence that the US economy is starting to slow. Despite strong job growth in recent months, the unemployment rate rose to 4.1 percent from 4 percent in June, the highest level since November 2021.

The Fed’s beige book, a survey of US economic conditions compiled by regional federal banks, said the US economy was slowing. Five of the 12 central bank districts reported flat or declining economic activity, three more than in the May survey.

Inflation also fell faster than expected, hitting 3 percent in June, fueling expectations that central bank cuts would be imminent. A quarter-point cut in borrowing costs in September has now been fully priced in by markets, with one or two cuts to follow later in the year. Thursday’s growth disappointment will make investors more rate-cut challenges. Kate Dukitt

Is the Eurozone recovery faltering?

The eurozone’s faltering economy will be in the spotlight on Wednesday, when results from the latest survey of purchasing managers shed more light on whether its tentative recovery has run out of steam.

S&P Global’s purchasing managers’ index is forecast to see only a slight pick-up in overall business activity after falling sharply to 50.9 last month.

„With earlier sentiment data showing the recovery losing momentum, we expect the August numbers to show little improvement in June,” Oxford Economics said in a report.

Comprehensive PMI results are likely to show a continued contrast between declining activity in the manufacturing sector and relatively strong growth in the larger services sector.

The PMI for services is forecast to rise to 53 from 52.8, according to a Reuters poll. The manufacturing PMI, by contrast, is forecast to inch from 45.8 to 46.3, below the 50 mark that separates growth from contraction.

That echoes European Central Bank President Christine Lagarde, who said last week: „Risks to economic growth are tilted to the downside.” He said that „manufacturing has fallen in the last few months” and investment is „weak” while services are „in the way”.

Investors will check the results of the Ifo Institute’s survey of German businesses, which is expected to show a slight rise in its business climate index to 89 from 88.6 last month when it is released on Thursday. Martin Arnold

Is UK activity still on the rise?

Investors’ attention will turn to buying managers’ indices, or PMIs, next week for early signs of the economy’s health in July and a trend in underlying price pressures.

According to analysts at Investec, the S&P Global Composite PMI index, which tracks activity in the manufacturing and services sectors, rose to 53 in July and is expected to rise to 52.3 in June.

They expect data released on Wednesday to show the increase was driven by the services sector, which analysts had forecast rose to 53 in July from 52.1 in the previous month. The manufacturing sector is also expected to show faster activity growth, with the index rising to 51.3 in July from 50.9 in June.

A reading above 50 indicates a majority of businesses reporting expansion.

„The clear result of the UK general election on July 4 may have reassured companies that the incoming government has ample opportunity to push through its legislative priorities,” said Sandra Horsfield, economist at Investec.

„This and the new government’s main focus on strengthening growth should help companies secure their own plans for the future,” he added.

The monthly survey will show changes in input and output prices for businesses, providing a measure of price pressures closely watched by the Bank of England as it decides when to start cutting interest rates from a 16-year high of 5.25 percent.

UK services sector inflation came in at 5.7 per cent in June, ahead of the BoE’s forecast. Horsfield said the shift in prices charged by businesses in the services sector seen in the June PMI data was „very welcome from the perspective of the monetary policy team”. Lover of Rome