Economic week ahead: More evidence of a slowdown likely
Last week, central banks in Europe and China indicated their mounting concerns about the state of the global economy by cutting interest rates. This week, investors will scour minutes from the Federal Reserve's latest meeting to see what officials said about the possibility and timing of further stimulus.
Markets will also be watching a slew of data releases from China closely this week. Analysts expect the data to show that the world's second-largest economy slowed to its lowest rate of growth in over three years during the April to June period. And at home, Statistics South Africa will release mining and manufacturing data.
This is a light week for data in the world's largest economy. Monday will bring May's consumer credit figures. Analysts surveyed by Dow Jones expect to see an expansion in credit to $7.8-billion in May from $6.5-billion in April.
The National Federation for Independent Business's small business survey for June will follow on Tuesday. Economists expect the measure to slip from 94.4 to 93.0.
The week's big economic release will come on Wednesday as the Federal Reserve releases the minutes from its June meeting. Markets will be scouring the notes for insights into the central bank's outlook for the US economy and likelihood of future economic stimulus measures.
On Thursday, weekly jobless claims figures, June's import prices and the federal government's latest budget deficit figures will garner attention. On Friday, June's producer price index (PPI) is seen easing 0.3% and the University of Michigan's consumer sentiment reading for June is seen edging higher, from 73.2 to 73.5.
Corporate earnings season also gets under way this week. Investors expect that the deteriorating state of the world's economy likely took a toll on corporate profits in the second quarter and will be watching several major corporate releases closely this week.
Alcoa will issue earnings on Monday. Levi Strauss and Wolverine Worldwide will follow on Tuesday. Marriott will release on Wednesday and banking giants JP Morgan and Wells Fargo will close things out on Friday.
European Central Bank chief Mario Monti's appearance before Europe's Parliament and a meeting of eurozone finance ministers will keep global markets transfixed on Monday. Investors and economists remain sceptical of European leaders' approach to the long-running crisis and pay close attention to any statements that could shed light on future actions.
Any insights gleaned on Monday could be overshadowed by a German court decision on Tuesday, however. Germany's constitutional court is scheduled to hold a hearing on the constitutionality of Germany's participation in the European Stability Mechanism (ESM) – Europe's permanent bailout fund.
If the court issues an injunction, the fund would lose Germany's contribution of €22-billion in paid-in capital and approximately €168-billion in callable capital. This represents roughly 27.15% of the European Stability Mechanism's total available funding.
Meanwhile, a series of industrial production data releases will dominate the continent's data calendar this week. On Monday, the Czech Republic and Turkey will release their latest industrial production data. France, Romania, the Netherlands, Sweden, Italy and the United Kingdom will follow on Tuesday. Eurozone industrial production figures will be released on Thursday.
Analysts expect the releases to make for grim reading. Figures are likely to show continuing contractions in activity in France – Europe's second largest economy – and the United Kingdom – the region's third largest.
This is a big week for Chinese data. Government officials are scheduled to release second quarter gross domestic product (GDP) figures along with June's industrial production, fixed-asset investment and retail sales data on Friday. Markets are not optimistic.
GDP data is expected to show that the world's second largest economy slowed to its lowest rate of growth in over three years during the April to June period. Economists surveyed by Market News International forecast 7.6% year on year growth, down from 8.1% growth in the first three months of the year.
Analysts are forecasting 9.9% annual growth in industrial output, marginally higher than May's 9.6% rise. Fixed-asset investment is predicted to rise 20.0% through the first six months of the year, down slightly from the 20.1% growth observed in the January to May period. China's retail sales growth is expected to have slowed to 13.5% in the second quarter from 13.8% in the first.
Elsewhere on the country's data calendar, officials will release imports, exports and trade balance data for June on Tuesday. Analysts expect that imports grew 12.7%, year on year, last month. Export growth probably fell to 9.9% annual growth in June from 13.5% annual growth in May.
Central bankers in Brazil, Chile and Peru will take centre stage this week as they gather to consider interest rates. Brazilian officials will announce their latest decision on Wednesday. Chile and Peru will both follow on Thursday.
Brazil's central bank has reduced the country's benchmark Selic rate by 400 basis points since August 2011 in a bid to boost the continent's largest economy. They are widely expected to continue their cuts – likely reducing the Selic by an additional 50 basis points to 8.0% – at this week's meeting.
Policymakers in Chile and Peru are expected to leave their country's interest rates unchanged, at 5.0% and 4.25%, respectively. The head of Peru's central bank, Julio Velarde, told reporters last week that he sees no need for additional monetary stimulus "for now" because domestic demand remains robust.
On the data front, Monday will see the release of copper exports and general trade balance figures in Chile and producer price index (PPI) data and vehicle sales in Columbia. Brazil's latest retail sales figures and seasonally adjusted economic activity index will follow on Wednesday and Thursday, respectively. Finally, on Friday, Argentina will release consumer price index (CPI) and wholesale price index (WPI) data.
This is a light week for data in South Africa – the continent's largest economy. On Monday, Absa will release its June housing price index and, on Tuesday, the South African Chamber of Commerce and Industry (Sacci) will release June's business confidence index.
On Thursday, Statistics South Africa will issue May's mining and manufacturing statistics. Markets expect manufacturing production to have risen 1.4%, year on year, in May, up from 1.2% in April.
Investors will also be watching the results of a government bond auction on Tuesday. National treasury is expected to auction R2.1-billion in 2018, 2023 and 2031 government bonds.
Matt Quigley writes the weekly economic preview for the Mail & Guardian. His blog on the South African economy can be found at thoughtleader.co.za/mattquigley.