Economic week ahead: Let's make a deal
The United States's fiscal cliff and an agreement between the EU and the IMF on Greece will set the tone for global markets this week.
Can the United States avoid its fiscal cliff? Can the European Union and International Monetary Fund agree on a way forward on Greece? The answers to these questions from Washington and Brussels will set the tone for the week ahead. Here is your guide.
Barring any big data surprises, signs of action or inaction in Washington on the US's "fiscal cliff" – the more than $600-billion in tax increases and spending cuts scheduled to come into effect automatically in January if leaders fail to act – will likely overshadow most economic data this week. Nevertheless, some important items are on the docket.
The first two are durable goods orders and consumer confidence data on Tuesday. Economists surveyed by Dow Jones suspect that orders fell 1.3% in October after rising 9.8% in September. The Conference Board's consumer confidence index is expected to rise to 73.0 this month from 72.2 in October.
On Wednesday, economists and investors will shift their attention to new home sales data. Markets expect that sales fell 0.5% last month after rising 5.7% to an annualised pace of 389 000 units in September, the best rate of sales since stimulus efforts in 2010.
On Thursday, pending homes sales are expected to show a 1% gain for October, up from a 0.3% rise in September. Weekly jobless claims are likely to show a drop from 410 000 to 395 000. And revised gross domestic product (GDP) figures may show that the US economy – the world's largest – grew by 2.8% in the third quarter, up from an initially estimated 2%.
Finally, on Friday, government data is likely to show that Americans saw their personal incomes rise 0.2% in October. Consumer spending, however, is expected to have remained unchanged last month after rising 0.8% in September.
Global markets are hoping that they may finally receive some encouraging related to Europe's debt crisis this week. European finance ministers and representatives of the IMF will resume talks on Monday aimed at reducing Greece's crippling debt to more manageable levels.
Reports over the weekend suggest that officials are coalescing around a deal that will clear the way for Athens to receive approximately €44.0-billion in external assistance by year's end. Among other obligations, Greece needs €3.4-billion to cover four-week treasury bills maturing next month and €500-million to cover a bond maturing in late-December.
On Tuesday, Portugal's parliament is expected to pass the country's 2013 budget. The package contains steep tax rises and deep spending cuts aimed at ensuring the country's continuing compliance with the terms of a €78-billion external bailout.
Elsewhere in the region, markets will also be keeping an eye on a number of debt auctions and issuances over the coming days. Germany will sell 12-month treasury bills on Monday and five-year notes on Wednesday. Italy will auction zero coupon and inflation linked bonds on Tuesday, short-term bills on Wednesday and medium- to long-term debt on Thursday. Spain will auction three-month and six-month bills on Wednesday.
Finally, highlights on Europe's data calendar include consumer confidence readings in Germany and Italy on Monday, France on Tuesday and the United Kingdom on Friday. The European Commission will release consumer sentiment readings for the euro zone on Thursday along with the bloc's business climate index and economic and industrial sentiment gauges.
The week ahead will bring a slew of information from Japan, the world's third largest economy. First up – on Tuesday – is the Bank of Japan's corporate services price index (CSPI). Markets expect the index to have declined for a sixth straight month in October.
Economists surveyed by Market News International expect retail sales data from Japan's ministry of economy, trade and industry – scheduled for release on Thursday – to show that sales fell 0.6% last month.
On Friday, Japan's Ministry of Internal Affairs and Communications will release October's consumer price index (CPI), unemployment rate and household spending statistics. The industry ministry will release last month's industrial output numbers and the Land Ministry will report October's housing starts.
Analysts expect the CPI to have fallen 0.1% last month, its sixth straight monthly decline. The country's unemployment rate is forecast to have remained unchanged at 4.2%. Household spending data is forecast to reveal a 0.7% year on year decline, its second straight drop, but less than September's 0.9% fall.
Industrial production is expected to have fallen for a fourth straight month in October, likely having declined 2.1% from September's levels. Housing starts probably rose to a seasonally adjusted annualised rate of 888 000 units from 866 000 in September.
Elsewhere in the region, India – Asia's third largest economy – will release gross domestic product (GDP) figures on Friday. Markets expect the subcontinent's economy to have expanded 5.3% in the July to September quarter compared to 6.9% growth during the same quarter of last year.
Central bankers in Brazil and Mexico – Latin America's two largest economies – will announce their latest rates decisions this week.
Markets expect officials at the Banco Central do Brasil to leave the Selic rate on hold at 7.25% – a record low – at their meeting on Wednesday. Economists responding to the central bank's most recent survey of economic expectations – a weekly poll of roughly 100 financial institutions – expect rates to remain stable through the end of 2013.
Policymakers at Mexico's central bank are unlikely to move rates at their meeting on Friday either. Mexico's central bank has left its benchmark lending rate unchanged since June 2009 and, with inflation seemingly falling from its September peak, markets expect rates to remain on hold through 2013.
Aside from these two meetings, both countries data calendars are comparatively light this week. Brazil will release consumer confidence index data on Monday, producer inflation and lending figures on Thursday and gross domestic product (GDP) figures on Friday.
Economists surveyed by Dow Jones expect GDP data to show that Latin America's largest economy grew by 2.3%, year on year, in the third quarter, up from 0.5% year on year growth during the previous quarter. Brazil's economic performance was tepid during the first half of the year, but many believe that loose monetary policy and government stimulus has finally paid off.
Mexico will release last month's preliminary trade data on Monday and lending data on Friday. Both countries will also report on their respective budgets on Friday.
South Africa will report GDP figures on Tuesday. Markets expect that Africa's largest economy slowed to 2.6% year on year growth in the third quarter from 3% growth in the second.
Elsewhere on the continent, central bankers in Mauritius and Zambia will gather to consider interest rates this week.
In the face of accelerating inflation, the Bank of Mauritius' monetary policy committee voted to leave the bank's repo rate unchanged at 4.9% at their September meeting. Markets expect them to do the same on Monday. Figures released earlier this month showed that the country's annual inflation rate accelerated to 4.2% in October, its highest level since January.
Inflation will undoubtedly factor into the Bank of Zambia's decision as well. Zambia's consumer price index rose by 6.8%, year on year, in October, up from a 6.6% rise in September. In the face of mounting price pressures, policymakers raised the bank's benchmark rate by 25-basis points to 9.25% in October, the first rise in the rate since its launch in April 2012.
Beyond these two meetings, a series of inflation and money supply snapshots from across the continent will feature prominently on Africa's economic calendar over the coming days.
Ghana will release producer inflation readings on Wednesday followed by South Africa on Thursday. Zambia will release consumer inflation data on Thursday followed by Kenya and Uganda on Friday.
Kenya will report the country's latest money supply figures on Monday. Figures will follow from Morocco on Wednesday and from Mauritius on Friday.
Matt Quigley writes a weekly economic preview for the Mail & Guardian. You can follow him on Twitter at @mattquigley.