Economic week ahead: Happy Christmas?
In the last week of 2012, investors will be waiting for word from the United States on its tax rises and spending cuts due to begin next year.
The United States's fiscal cliff, a raft of automatic spending cuts and tax rises scheduled to begin in January, will remain this week's biggest business story. Politicians have yet to hammer out a deal and, with time running out, investors around the world are anxious for action.
As they wait for word from Washington, markets will mull over the latest confidence indicators from Europe, inflation data from Japan and a few key releases from elsewhere in the world. Your guide to the final week of 2012 follows.
US lawmakers have little time left to avoid the fiscal cliff threatening to plunge the world's largest economy back into recession, dragging the rest of the global economy down with it. Fears that negotiations between Republicans and Democrats will not succeed sent markets around the world tumbling on Friday and the sell-off is likely to continue until a deal is announced. Talks are set to resume after Christmas.
The fiscal cliff is likely to overshadow most data releases this week, but investors are still likely to focus on a few key items. Highlights include the Standard & Poor (S&P)/Case-Shiller housing price index on Wednesday; weekly jobless claims figures, new home sales data and consumer confidence index readings on Thursday; and the Chicago purchasing managers' index (PMI) and pending homes sales figures on Friday.
Economists surveyed by Dow Jones expect the S&P/Case-Shiller index to post a 4.2% rise in October, up from a 3% uptick in September. Jobless claims are expected to increase to 367 000 from 361 000 in the previous week. And the Conference Board's confidence index is expected to drop to 70 from 73.7 in November.
New homes sales are expected to have risen 1.4% last month, following a 0.3% drop in October, and analysts predict a 0.1% rise in pending home sales in November after a 5.2% increase in the previous month.
Finally, the Chicago PMI – a national proxy – is forecast to rise to 50.8 from 50.4 in November. Any reading above 50 indicates expansion.
The week ahead is extremely light on European economic data. With the exception of foreign tourist arrival statistics and capacity utilisation figures from Turkey on Christmas, the continent's first releases of the week are not scheduled to occur until Thursday.
On the third to last trading day of the year, Russia will report its latest manufacturing purchasing managers' index (PMI), France's National Institute of Statistics and Economic Studies (INSEE) will release its latest consumer confidence index readings and Italy's Institute for Studies and Economic Analyses (ISAE) will release its business sentiment index.
Markets expect INSEE's index to remain unchanged. Analysts at 4CAST expect ISAE's index to drop to 87.0 in December from 88.5 in November.
Closing out the week, on Friday, Russia will report its services PMI, France – the continent's third largest economy – will release consumer spending and gross domestic product (GDP) figures and Spain – Europe's fifth largest economy – will release retail sales numbers.
Economists expect French consumer spending to have remain flat on a monthly basis in October following a 0.2% month on month decline in October. On annual basis, spending probably fell 0.6%, slightly greater than the 0.5% year on year decline reported for October. The country's GDP is expanded by a lucklustre 0.1% in the third quarter.
Spain, which is in the second year of deepening recession, is expected to report abysmal retail sales figures. Markets expect November's sales data to show a 10.3% year on year drop, worse than the 9.7% decline observed in October.
The coming week is heavy with Japanese economic data. The world's third largest economy will release the Bank of Japan's corporate services price index (CSPI) on Monday and housing starts on Thursday. Closing out the week, officials will release consumer price index (CPI), unemployment, household spending, retail sales and industrial production data on Friday.
Japan's CSPI fell by 0.7% in October, its fifth consecutive year on year drop. Markets expect prices fell again in November, but at the slightly lower rate of 0.6%. Downward price pressures have generally eased since the CSPI posted a record drop of 3.8% in August 2009.
Economists surveyed by Market News International expect November's housing starts data to show a 10.9% year on year rise to an annualised rate of 902 000 units, down from a 25.2% surge in October.
Japan's CPI is forecast to have dropped for the first time in two months in November – by 0.1% – after no change in October and a 0.1% decline in September. The country's November unemployment rate is expected to remain unchanged at 4.2%.
Analysts expect that household spending rose by 0.8%, year on year, last month, the first rise in three months following 0.1% and 0.9% declines in October and September, respectively. Retail sales are expected to have risen 1.0% last month, following a 1.2% decline in October.
Industrial output is expected to have fallen 0.5%, month on month, in November. If forecasts prove accurate, this would mark the first decline in output in two months.
On Monday, Brazil – the region's largest economy – will report weekly trade balance figures and the country's central bank will release the results of its latest survey of market expectations. Elsewhere in the region, Argentina will report budget figures and Columbia will report on tax collections.
On Wednesday, Brazil's Getulio Vargas Foundation (FGV) will report its weekly consumer price index (IPC-S), Mexico will provide its weekly report of international reserves and Chile's central bank will release the results of its bi-weekly survey of economic expectations. Traders and investors polled earlier this month forecast no change to the country's benchmark 5.0% rate through the end of 2013.
On Thursday, Argentina will release shop centre and supermarket sales data, Brazil's FGV will release its monthly general price index (IGP-M) and Mexico will release preliminary trade balance numbers. Markets expect FGV's IGP-M to show that prices rose 7.78%, year on year, between November 21st and December 20th, up from a 6.96% rise over the same period in October and November. Mexico's trade deficit is expected to have narrowed to $614.0-million in November from $1.646-billion in October.
Finally, on Friday, Chile will report the country's latest copper production figures, unemployment rate reading, retail sales and manufacturing index results. Brazil will report net debt as a percentage of gross domestic product (GDP) and nominal and primary budget balance. Columbia will report its unemployment rate, Mexico will report its year to date budget balance and Argentina will release proxy construction activity and proxy GDP figures.
Middle East and Africa
The Bank of Israel will announce its latest policy decision on Monday. The bank's monetary policy committee left the bank's benchmark rate unchanged at 2.0% in November. But a report released last week showed that inflation slowed to 1.4% in November, the lowest since July. This has increased speculation that officials may cut interest rates – most likely by 25-basis points – at this week's meeting.
In Africa, the week ahead will bring a few noteworthy releases. Ghana will release third quarter gross domestic product (GDP) figures. Kenya will release November's overseas remittances data. Morocco will release last month's M3 money supply figures. Namibia will release November's M2 money supply and foreign reserves data. And Zambia will release December's consumer price index (CPI).
South Africa – the continent's largest economy – will release November's preliminary import, export and trade balance figures on Friday. South Africa's trade deficit widened to a record R21.2-billion in October, bringing the country's cumulative trade deficit through the first 10 months of the year to a whopping R104.6-billion.
In a recent research note, analysts at Lloyds Bank forecast an improvement in November's numbers – which they attribute to a rebound in previous metal exports following labour disruptions in the sector earlier this year – but still sounded a note of concern over the country's current account.
"Although we expect the deficit narrowed in November to – R13.5-billion, this still suggests that South Africa's current account will widen in [the fourth quarter] from -6.4% of GDP in [the third quarter]."
Matt Quigley writes a weekly economic preview for the Mail & Guardian Online. You can follow him on Twitter at @mattquigley.