Economic week ahead: Dark clouds or silver linings?
Over the coming days, US President Barack Obama will begin talks on the country's fiscal cliff, while China will wrap up its leadership transition.
The eurozone will release growth figures, while Brazil and South Africa – Latin America and Africa's largest economies, respectively – will release retail sales figures. Here is your complete guide to the busy economic week ahead.
The US budget situation will feature prominently this week. Treasury officials will release last month’s federal budget numbers on Tuesday. Market consensus is that outlays exceeded receipts by $113-billion in October, the first month of America’s 2013 fiscal year.
Later in the week, President Barack Obama will begin talks with congressional leaders on America’s "fiscal cliff", the term analysts have given to the roughly $600-billion in spending cuts and tax hikes scheduled to take effect in January without congressional action. The nonpartisan Congressional Budget Office (CBO) and many on Wall Street fear that the shock of these tax rises and spending cuts would throw the world’s largest economy back into recession.
In between these political events, markets will have plenty of standard economic data to mull over. Wednesday will bring last month’s retail sales and producer price index (PPI) figures. Consumer price index (CPI), new jobless claims and two manufacturing surveys will follow on Thursday. The week will close with industrial production statistics on Friday.
Economists surveyed by Bloomberg expect retail sales data to show a 0.1% monthly decline. The PPI is predicted to have risen 0.2% in October, following a 1.1% rise in the previous month. The CPI is forecast to have risen 0.1%, down from 0.6% in September.
Analysts surveyed by Dow Jones expect both the New York and Philadelphia Federal Reserves' regional manufacturing gauges to have lost ground last month. Industrial production is likely to have risen 0.2% in October, after rising 0.4% in September.
Global markets will be nervously focused on Europe this week. The eurozone's finance ministers will meet on Monday to consider, among other matters, whether or not Greece has done enough to warrant another tranche of funding.
Greece’s Prime Minister, Antonis Samaras, has warned that his country could run out of money by Friday unless the European Union, International Monetary Fund and European Central Bank release roughly €31-billion in aid. Recent press reports have speculated that, although officials may not give Greece everything it desires, some funding will be released to avoid an immediate crisis.
Beyond Greece, investors will be eagerly awaiting Germany’s ZEW economic sentiment indicator and the United Kingdom’s latest consumer price index (CPI) readings. Both are scheduled for release on Tuesday.
Economists expect the closely followed ZEW economic sentiment index to improve to a reading of minus 8.5 following minus 11.5 last month. In the United Kingdom, the annual pace of consumer inflation is forecast to rise to 2.5% in October from 2.2% in September. Analysts expect the Bank of England to admit on Wednesday that inflation is proving to be more “sticky” than officials had hoped.
Finally, Europe’s latest GDP numbers – scheduled for release on Thursday – will undoubtedly show that the 17-member eurozone remains in an economic funk. Individual figures from Germany and France – the currency bloc’s two largest states – are likely to show anaemic growth. Numbers from Italy and Spain – the group’s next largest members – are widely expected to point to continuing contraction.
China’s leadership transition will continue to occupy centre stage in Asia this week. State media reported that the Communist Party Congress’ presidium – comprised of 41-current and former members of the Party’s leadership – approved the candidate list for the Central Committee and sent it to the Congress’s 2 268 delegates on Saturday.
Delegates will cast their votes for the 350-member committee before the close of their gathering on Wednesday. The new Central Committee will, in turn, select the country’s top leadership. At the top of the list, Vice President Xi Jinping is widely expected to replace President Hu Jintao.
China’s new leadership will inherit an economy – the world’s second largest – that has slowed significantly from its pre-crisis highs, but has shown recent signs of improvement. Data released on Friday covering industrial production, investment and retail sales all beat market expectations and inflation came in lower than anticipated. Lower than expected inflation may give authorities more room to loosen monetary policy to further encourage growth.
Elsewhere in Asia this week, India will release industrial production statistics on Monday. Economists surveyed by Reuters expect the data to show that year on year output rose 2.8% in September, the fastest rate of growth since February, but still well below the double-digit growth recorded before the global financial crisis of 2008.
Officials will report wholesale price index (WPI) readings on Wednesday. Inflation rose to its highest level of the current fiscal year in September. Economists expect evidence of continuing pressures in this week’s data.
Brazil – the region’s largest economy – will release retail sales figures on Tuesday. The central bank’s latest economic activity index reading and formal job creation figures will follow on Wednesday.
Markets expect retail sales growth to remain unchanged at 0.2% monthly growth in September. On an annual basis, growth is expected to fall from 10.1% in August to 8.7% in September.
Analysts at 4CAST expect the central bank’s economic activity index – a monthly GDP proxy – to show a 1.2% contraction in September following a 0.98% rise in August. Markets expect the CAGED formal job creation numbers to show that Brazil added 81 700 positions in October, down from 150 334 in September.
Mexico – Latin America’s other economic heavyweight – will also feature prominently in this week’s news. Government officials will release industrial production numbers on Monday and economic growth figures on Friday. Markets expect industrial output to have dropped to 3.0% year on year growth in September from 3.6% in August. Mexico’s finance ministry expects gross domestic product to have expanded 3.3%, year on year, in the third quarter, down from 4.1% growth during the previous three months of the year.
Elsewhere in the region, the Central Bank of Chile will announce its latest rates decision on Tuesday. Economists expect officials to leave the bank’s nominal overnight rate on hold at 5.0% for the tenth straight month. Healthy domestic demand, a tight labour market and copper export earnings have helped keep the country growing at a comparatively strong pace.
This week is a busy one for South Africa, the continent’s largest economy. Trade information will dominate on Monday as officials release September’s detailed trade numbers and the South African Chamber of Commerce and Industry issues the results of its October trade conditions survey.
On Wednesday, Statistics South Africa (Stats SA) will step to the fore with retail trade numbers. Markets expect the data to show that retail sales growth slipped from 6.4% annual growth in August to 5.4% growth in September.
On Thursday, Stats SA will release wholesale trade, motor trade, building statistics and civil cases for debt. All releases cover September’s data.
Elsewhere on the continent, Namibia, Ghana and Tanzania will release their latest CPI readings. Uganda will release M3 money supply figures, Kenya will fix petrol prices and Ghana’s central bank will decide on changes to its benchmark interest rate.
The rate-setting committee of the Bank of Ghana left the bank’s key monetary policy rate on hold at 15.0% at its most recent meeting in September. Analysts expect them to do the same at this week’s meeting.
Finally, markets will be keeping a close eye on Uganda’s shilling over the coming days after Norway announced last week that it would join Denmark, Ireland and the United Kingdom in suspending foreign aid payments to Africa’s largest coffee producer. The announcement followed a report by the country’s auditor general that more than €12-million in aid intended for reconstruction projects had been diverted into unauthorised accounts.
Matt Quigley writes a weekly economic preview for the Mail & Guardian. You can follow him on Twitter at @mattquigley