The G20 meeting and other things to look for in economics this week

It is easy to be cynical about the value of international economic meetings, and the forthcoming G20 meeting in Hamburg on Friday and Saturday is a case in point. A load of politicians make fine statements and nothing happens.

But remember that the G20 is the nearest thing the world has to the cabinet of a global government: a get-together of the leaders of countries that account for more than 80 per cent of world GDP. That is kind of important, surely?

There are several areas worth watching. One will be whether the US and China get on. The Chinese leadership has been thrown by Donald Trump, for he is everything that they are not: disorganised, impetuous, short-termist, inconsistent. They are not used to dealing with an America led by someone like this, so let’s see how they react. Will they want to take on some sort of global leadership role, as they appeared to at the Paris climate change summit? What sort of feeling will we get for future trade relations between the US and China?

Will Vladimir Putin behave himself? More specifically, will we have any indication of the relationship between him and Angela Merkel, for that is the key to Europe’s energy security. Without Russian gas, Europe freezes. It will also be interesting to see Emmanuel Macron on the international stage for the first time. He faces both huge expectations and huge budgetary problems: not a great combination.

The one thing not to look for this coming week will be anything to do with Brexit. Ignore just about everything; it is noise, not signal.

If you want signals about the next steps for the world economy, there are a whole clutch of purchasing managers’ indices for June. The UK ones (we have both services and manufacturing) will be disappointing, showing the loss of business confidence that has followed the election. I don’t expect anything quite on the scale of the post-Brexit collapse, which in any case was quickly reversed, but it would be silly not to acknowledge the damage that has been done.

These June PMI figures should tell us whether UK growth in the second quarter has recovered from the slowdown in the first. Probably a bit, but it will not be encouraging. The rest of the world, by contrast, will be quite upbeat. For once, just about the entire world economy is growing at a decent clip.

Unemployment in Europe, though still well above 9 per cent, will be seen to have come down a little when the figures are published on Monday, but it will still be double that of the US. On Friday we have the all-important US unemployment numbers, showing the headline number down perhaps to 4.2 per cent. Employment, clumsily called non-farm payrolls, is still rising slowly, supporting the probability of another rise in US interest rates in the autumn.

Finally on a rather sourer note, I’m interested in what is happening in Illinois. The state is bust. It has run for three years without a budget, but now things have come to head. Without a deal in the next few days, its debt is likely to lose investment status. That would mean that many funds cannot hold that debt and have to sell. The state may not be able to meet payroll or pay pensions. All right, it is only a state, but it is a big one, with 13 million people.

More generally, this is a reminder of the dysfunctional nature of US public sector finances. The federal government is likely to hit its debt ceiling in the next few weeks. That would lead to a possible government shutdown, unless there is agreement in Congress to lift it. A (financially) bumpy summer lies ahead.