Five things to look out for in the US economy, including how China and Europe respond to a trade war

The Federal Reserve governor testimony to the two houses of Congress will tell us about investment, international trade and the general robustness of sales

Despite Trump’s meeting with Chinese president Xi Jinping in Beijing last year. tensions are mounting between the countries (Reuters)

That strange mixture of solid global growth and unease about the future continues this week. There are several big running economic stories, and the things to look out for are events or information that will help us understand how those stories might develop.

But let’s start with something not to look out for: the Trump visit to Helsinki to meet Vladimir Putin.

The reason for that is that, aside from its impact on the oil and gas markets, Russia is too small an economy to have any impact on the rest of the world, and its energy policies will not be affected by the summit.

Of course, Russia matters massively in geopolitical terms, but we won’t learn anything about the world economy.

So what’s to look for? Start with something that links the two biggest running economic stories of all: what might happen to the US economy, and what might happen to the trade war. The Federal Reserve governor, Jerome Powell, will give his twice-a-year testimony to the two houses of Congress on Tuesday and Wednesday.

What will he say about the extent to which businesses are holding back on investment because of fears about international trade? What about the general robustness of the US activity? There is some data coming out on retail sales and manufacturing activity, and let’s see what they say too.

As for the trade war, the key thing to watch is China’s response. What happens between the US and Europe does not matter much. What happens between the US and China does.

China has been cautious in its response so far, for any restrictions to exports to the US come at a bad time as it tries to put its financial system on a sounder footing. (It engineered a huge borrowing boom after the financial crash of 2008 in order to keep growth going.)

Exports have actually held up quite well, and we will get GDP and other data on Monday.

In the UK, there is a lot of stuff coming out that will indicate how well the economy is holding up in the runup to Brexit, with figures on inflation, retail sales, the labour market and government finances.

This will be the last important figures to come out before the Bank of England’s rate-setting meeting the week after, so will have obvious implications as to whether the bank’s monetary policy committee increases interest rates.

The thing to watch in the labour market data is employment – is it still growing solidly? – and in the public finances it’s the revenue. If tax receipts are growing at a reasonable clip, then the economy must be growing decently too.

In Europe the issue is whether the spring slowdown is just a cyclical blip or a harbinger of something worse. The head of the German Bundesbank, Jens Weidmann. is reported to have warned the German government about a slowdown in the autumn.

Bank of America Merrill Lynch Global Research has just put out a paper on Europe entitled There Be Trouble Ahead. The thrust of this argument is that the underlying growth rate of the eurozone is only a little above 1.5 per cent and that the region is vulnerable to any cyclical shock. The inherent weaknesses of the eurozone have not been tackled.

Finally, I am always intrigued by the extraordinary performance of the high-tech giants of America. Their shares, and those of smaller technology companies, have continued to soar. Last week the Nasdaq composite index was at an all-time high.

The S&P 500 index was at a four-month high, pulled up by Amazon. This cannot go on for ever, but every time the sector seems over-priced companies come along with record sales and/or profits.

How long can these valuations persist? No one can know, but it is a hugely important question because a de-rating would have big knock-on impact on the economy.