Economic week ahead: Stimulating?
The European Central Bank will take centre stage this week as policymakers gather for their first meeting of the year. Is a rate cut imminent?
Elsewhere in the world, earnings season will begin in the United States, China will conduct its monthly data dump, economies throughout Latin America will provide snapshots of inflation and Egypt's newly reshuffled leadership will meet with the International Monetary Fund. Here is your guide to the economic week ahead.
Markets will have to wait until Friday for the big report on America's data calendar this week. Economists surveyed by Dow Jones expect the country's latest trade figures to show that its trade deficit narrowed to $41-billion in November from $42.2-billion in October, largely as a result of falling oil prices.
Other highlights on an otherwise sparse calendar this week include the National Federation of Independent Businesses's small business optimism index on Tuesday and government jobless claims figures on Thursday. Analysts surveyed by Bloomberg expect the NFIB's index to have risen to 87.9 in December from 87.5 in November. Initial jobless claims are forecast to drop to 368 000 from 372 000 in the prior week.
In the absence of data, investors are likely to focus their attention on a series of speeches by regional Federal Reserve chiefs over the coming days for hints of future action by the central bank. Jeffrey Lacker, the Federal Reserve Bank of Richmond's head, will speak on the country's economic outlook on Tuesday. Addresses by Kansas City's Esther George, St Louis's James Bullard – both voting members of the Fed's policy setting body in 2013 – and Minneapolis' Narayana Kocherlakota will follow on Thursday. A talk by Philadelphia's Charles Plosser will close out the week on Friday.
Also in the background this week, earnings season will get underway. Dow component Alcoa, the aluminium giant, is the big reporter this week. Consensus among analysts is for fourth quarter earnings of six cents per share.
Meetings of the European Central Bank (ECB) and Bank of England (BOE) will dominate Europe's economic week. Both banks will announce their policy decisions on Thursday.
Most economists expect the bank to refrain from lowering the bank's benchmark rate – currently at a record low 0.75% – at this month's meeting, but some believe that the continent's grim economic outlook may prompt officials into further action soon. The central bank's forecast predicts that the eurozone will contract by 0.3% this year and data released last week showed a further drop in consumer credit and loans to businesses in November. Markets widely expect the Bank of England to leave rates on hold at 0.5%, also a record low, and to leave the size of the bank's quantitative easing programme unchanged at £375-billion.
Beyond these two key meetings, European markets will keep an eye out for two important data releases in Germany this week.
On Tuesday, Germany will release November's factory orders. Economists expect the data to show that orders fell 1.5%, month on month, following a surprise 3.9% uptick in October. On an annual basis, however, orders performance is expected to improve to a decline of 0.4% in November from a decline of 2.4% in the previous month.
The country's slow improvement in orders is expected to boost industrial production upwards. November's output data, scheduled for release on Wednesday, is expected to show that industrial production in the continent's largest economy rose 1.0% in November following a 2.6% decline in October.
Key data from the region's three largest economies are the big items on Asia's economic calendar this week.
On Thursday, India – Asia's third largest economy – will release December's import, export and trade balance figures. India posted a trade deficit of $19.3-billion in November. This was slightly less than October's record $20.1-billion deficit, but still cause for concern. Markets expect to see some continued, though slight, improvement in December's figures.
On Friday, China – the world's second largest economy – will release import, export and trade balance numbers along with consumer price index (CPI), producer price index (PPI), money supply and new yuan loans data. Japan – the world's third largest economy – will release current account information.
Analysts at 4CAST expect China's exports to have risen 9.2%, year on year, and imports to have grown 3.5%, year on year, last month. The country's trade surplus is expected to have risen to $26.9-billion from $19.6-billion in November, the smallest surplus recorded in five months.
Markets expect the pace of consumer inflation to have picked up to 2.3% year on year growth in December from 2% growth in November. Prices at the factory gate likely fell 1.8% from a year earlier in December, less than the 2.2% drop observed a month earlier.
Economists surveyed by Market News International expect Japan's current account to show a 49.0-billion yuan deficit in November, down from a 126.1-billion yuan surplus in November 2011. If the forecast proves accurate, November's deficit will be the largest observed since January 2012's record 455.6-billion yuan shortfall.
Brazil will release a number of inflation gauges this week, but a slew of data from Mexico is likely to dominate the region's calendar.
On Tuesday, officials will release weekly international reserves figures, last month's vehicle sales numbers and December's consumer confidence index (CCI). The CCI fell to 94.2 in November and is expected to slide further to 93.7 in December.
On Wednesday, Mexico will release November's final trade balance, estimated at $1.273-billion, and December's CPI. Markets expect core CPI rose 0.22%, month on month, in December, down from a 0.5% rise in November.
On Thursday, Mexico will release gross fixed investment data and IGAE data – a monthly gross domestic product (GDP) proxy. Gross fixed investment is forecast to show a 3.8% year on year rise. IGAE data is expected to show that the country's economy expanded by 3.85% in November.
Finally, on Friday, industrial production figures are likely to show that output rose 3.5%, year on year, in November, down from 3.6% in October.
Elsewhere in the region, Chile will release copper export, trade balance and economic activity index data; Argentina will report budget figures; and Venezuela will release vehicle sales on Monday. CPI data will follow from Chile and Venezuela on Tuesday along with Colombia's latest vehicle sales, export and production data.
Peru will report trade figures on Wednesday and announce its latest monetary policy decision on Thursday. Economists expect the central bank to leave the country's reference rate on hold at 4.25%.
Middle East and Africa
On Monday, the International Monetary Fund (IMF)'s director for the Middle East and Central Asia, Masood Ahmed, and other delegates will meet with representatives of the Egyptian government to discuss "possible IMF support for Egypt", including the terms of a postponed $4.8-billion loan agreement.
In a bid to reassure Egyptians that the government can avert an economic crisis, President Mohammed Morsi reshuffled his cabinet on Sunday. Among the changes made, Finance Minister Mumtaz al-Said – previously Egypt's chief negotiator with the IMF – was replaced by El-Morsi El-Sayed Hegazy, an Islamic finance specialist and finance professor at Cairo University, a political newcomer.
Also on Monday, Ghana will swear in newly elected President John Dramani Mahama and a new Parliament. Opposition parties are challenging December's election results, which they believe were rigged, despite statements by international observers that the elections were free and fair. In a speech on Friday, Mahama said that economic growth in Ghana was probably between 8.5% and 9.0% in 2012, but cautioned that political unity was required to ensure continued prosperity.
Tuesday will bring December's gold and foreign exchange reserves data from South Africa's central bank. The South African Chamber of Commerce and Industry's latest business confidence readings will follow on Wednesday.
On Thursday, Statistics South Africa will release November's manufacturing production numbers. Output unexpectedly rose 2.5%, year on year, in October, but few expect similar good news from November's figures. Analysts at 4CAST, for example, expect to see a 3.3% drop, year on year.
Matt Quigley writes the weekly economic preview for the Mail & Guardian. You can follow him on Twitter at @mattquigley.