Economic week ahead: Money, money, money
Ben Bernanke, America's central bank chief, and Mario Draghi, his European counterpart, will address the Federal Reserve's annual economic symposium in Jackson Hole, Wyoming on Friday and Saturday, respectively. Investors will be watching them closely.
In the run-up to the weekend's big news, a host of data releases over the coming days will provide clues to the current and future performance of the world's economy. Here is your guide to the economic week ahead.
Manufacturing data will feature prominently on America's data calendar this week. The Federal Reserve Bank of Dallas will release its August manufacturing index on Monday. Similar regional measures will follow from the Richmond and Kansas City Feds on Tuesday and Wednesday.
Economists surveyed by Bloomberg expect all three gauges to improve in August, but for the Dallas and Richmond measures to remain in contraction territory.
More insight into the state of industrial America will follow on Friday. Analysts surveyed by Dow Jones expect the Chicago purchasing managers' index (PMI) – a regional measure which closely tracks national performance – to drop slightly, but to remain in expansion territory. National factory orders, meanwhile, are seen rising 2.5% in July following June's 0.5% fall.
Elsewhere on the calendar, on Tuesday, the S& P/Case-Shiller home prices index is forecast to show a 0.1% annual rise for June and the Conference Board's August consumer confidence index is expected to remain flat.
On Wednesday, analysts expect revised gross domestic product (GDP) figures to show that the world's largest economy expanded at an annualised rate of 1.7% in the second quarter. Separately, the National Association of Realtors' pending home sales index is seen rising 0.8% in July after falling 1.4% in June.
On Thursday, weekly jobs claims are seen falling 2 000 to 370 000, July's personal incomes are seen rising 0.3% and July's consumer spending is seen rising 0.5%. Finally, on Friday, the Reuters/University of Michigan's August consumer sentiment index is expected to remain flat.
Europe's three-year old debt crisis will continue to loom large over the region's markets this week. Despite high expectations for action, European officials have yet to convince investors that they have the situation under control. Rumours abound, but no concrete plan – including a broadly anticipated resumption of the European Central Bank (ECB)'s bond buying programme – has yet emerged.
This week, a series of Italian bond auctions will provide a window into the effect this policy paralysis is having on investor sentiment. The eurozone's third largest economy will offer zero coupon notes and inflation-linked bonds on Tuesday, six-month treasury bills on Wednesday and longer-term treasury notes on Thursday.
Yields – a proxy for government borrowing costs – in Italy and Spain have tumbled over the past month on expectations that the ECB will resume large-scale purchases of troubled countries' debt. Hope may continue to triumph over fear this week, but the question on many analysts' minds is how much longer markets will tolerate inaction.
A series of data releases scheduled for this week will help to clarify the effect of policy uncertainty on corporate sentiment. On Monday, Germany's IFO Institute will release its latest monthly gauges of business confidence. Markets expect the institute's business climate, current conditions and expectations indices to fall slightly.
On Wednesday France's INSEE business confidence indicator is also seen falling. On Thursday, Italy's ISAE business sentiment index and the eurozone's latest business climate, economic sentiment and industrial sentiment indices are all expected to show further deterioration.
With no major data releases scheduled in China – the world's second largest economy – this week, Asian markets will likely take their cues from data releases elsewhere in the region.
Japan – the world's third largest economy – will release a slew of data on Thursday and Friday. Analysts surveyed by Market News International expect July's retail sales data to show on Thursday that sales dropped 0.3% last month, the first fall in eight months.
On Friday, officials will release consumer price index (CPI), unemployment, household spending, industrial output and housing starts data.
Economists expect Japan's national core CPI – which excludes volatile food and energy costs – to have fallen 0.3%, year on year, in July. If the consensus forecast proves accurate, last month would mark the third straight month of falling prices for the island nation.
Unemployment is expected to have remained remain unchanged at 4.3% and household spending is forecast to have risen 0.8%, year on year, the data set's sixth consecutive monthly increase. On a monthly basis, July's industrial output is seen rising 1.7%, following a 0.4% increase in June, and housing starts are expected to increase to a seasonally adjusted annualised rate of 879 000 units, up from 837 000 in June.
Other notable data releases in Asia this week include South Korea's industrial production figures on Thursday and India's latest gross domestic product (GDP) data on Friday. Markets expect that industrial production in South Korea rose 0.4% last month. India's economy likely expanded 5.3% in the second quarter.
Latin AmericaBrazil's central bank will meet on Wednesday to consider interest rates. Markets widely expect officials to lower the bank's target Selic rate from 8.0% – already a record low – to 7.5% in a further bid to bolster growth in the region's largest economy.
Brazilian officials have cut the key rate by 4.5% since August 2011, but many speculate that – with several recent economic indicators, including retail sales and industrial production, pointing to recovery and inflation running above government targets – policymakers may halt their loosening of monetary policy at this week's meeting.
Elsewhere in the region, Argentina will release budget figures on Monday and supermarket sales on Tuesday. Peruvian gross domestic product (GDP) data and Chilean retail sales data will follow on Wednesday and Thursday, respectively.
Markets expect GDP data to show that Peru's economy expanded by 6.2% in the second quarter, up from 6.0% in the first. Analysts at 4CAST expect the pace of retail sales growth in the Chile fell from 8.9% growth, year on year, in June to 7.2% growth in July.
Also on Thursday, Chile will release copper production figures and manufacturing index readings. Brazil will issue a series of lending reports and producer inflation data.
A series of significant data releases in South Africa – the continent's largest economy – will dominate Africa's economic calendar this week.
Statistics South Africa (Stats SA) will issue second quarter economic growth figures on Tuesday. Analysts at Lloyds Bank expect the release to show that gross domestic product (GDP) grew at a seasonally adjusted annualised rate of 2.9% in the second quarter, up from 2.7% during the first three months of the year.
In written comments, Lloyd's staff attributed the likely rise in GDP to a recovery in the mining sector and healthy household spending during the period, but cautioned that "the underlying growth trend is expected to be modest as manufacturing and construction activity both drag on growth."
On Thursday, Stats SA will release July's producer price index (PPI) – a measure of price rises at the factory gate – and the South African Reserve Bank will issue last month's money supply and credit extension data.
Markets expect that the PPI rose 1.6% from June to July, down from a 4.4% increase from May to June. Money supply likely expanded by 6.71%, down from 6.99% in June, and private sector credit extension likely slowed to 8.3% growth from 8.72% in the previous month.
Finally, on Friday, the South African Revenue Service (SARS) will release last month's trade data. Analysts at Lloyd's expect the figures to show that South Africa's trade deficit grew to R7.6-billion last month from R5.1-billion in June, mainly as a result in reduced demand for the country's exports.
Matt Quigley writes a weekly economic preview for the Mail & Guardian. You can follow him on Twitter at @mattquigley.