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Economic week ahead: Debt drama

Matt Quigley

Elections in Italy and more debt drama in the US could rattle markets but this week data reigns supreme. Here is your guide to the week ahead.

In South Africa, consensus is that consumer prices rose 0.6% in January, an acceleration from December’s 0.2% monthly rise. (Oupa Nkosi, M&G)

The world’s two largest economies – the United States and China – will release housing market numbers. Europe will issue a series of updates on consumer and business confidence. Brazil and Mexico will provide growth snapshots and South Africa and Nigeria will report on inflation.

North America
Markets in the United States – the world’s largest economy – will be closed on Monday in observance of the country’s annual President’s Day holiday. In the shortened trading week that follows, a series of housing and inflation reports will dominate.

The National Association of Home Builders’s housing price index for February will kick things off on Tuesday. Economists surveyed by Bloomberg expect the index to have climbed from 47 in January to 48 this month, the highest reading since 2006.

More housing data and the first of two inflation reports scheduled for release this week will follow on Wednesday. Analysts expect commerce department data to show that, at an annual rate, builders broke ground on 920 000 new houses in January, down from December’s 954 000 annualised pace. The number of building permits issued – a proxy measure for future construction – likely climbed 1.2% in January to an annualised rate of 920 000 units. January’s producer price index (PPI) is likely to show that, on a monthly basis, prices at the factory gate rose 0.3% in January following December’s 0.2% decrease.

On Thursday, the consumer price index (CPI) is expected to show a 0.1% month-on-month rise for January following December’s flat reading and November’s 0.3% decline. Existing home sales data from the National Association of Realtors is likely to show that sales fell 0.8% on a monthly basis to a seasonally adjusted annualised rate of 4.9-million units in January after falling 1% to 4.94-million homes in December.

Europe
A series of consumer and business confidence measures, flash manufacturing purchasing managers’ index (PMI) readings and updated growth forecasts from the European Commission will dominate Europe’s economic calendar this week.

On Tuesday, Germany’s Centre for European Economic Research will release its monthly economic sentiment index. This closely followed measure reports the combined sentiments of approximately 350 economists and analysts regarding the country’s economic performance for the next six months. Consensus is that the index will increase from 31.5 to 35, but some forecasters are considerably more optimistic.

Preliminary consumer confidence readings for the 17-member eurozone will be released on Wednesday. Markets expect to see a slight improvement, from an index reading of -23.9 to -23.1.

Thursday will bring flash manufacturing PMI readings for Germany, France and the eurozone. Markets expect Germany’s manufacturing PMI to rise above the 50-mark separating expansion from contraction. France’s index is forecast to rise from 42.9 to 44.5 and the eurozone’s measure is likely to rise from 47.9 to 49. If the forecasts prove accurate, analysts are likely to take the continuing increases as a sign that Europe may escape recession over the coming months.

On Friday, markets will turn their attention to the European Commission’s latest Economic Growth Forecast and another influential leading index in Germany. Most economists expect the European Commission to maintain its 0% forecast for 2013 growth in the euro area. Markets expect the Ifo Institute for Economic Research’s expectations index to rise from 100.5 to 101.5.

Asia
China will return to work on Monday after last week’s celebration of the Spring Festival, the most important holiday on the country’s calendar. The only significant economic release scheduled in the world’s second largest economy this week is Friday’s January housing price numbers. The National Bureau of Statistics dataset covers 70 major cities. It is likely that the release will show continued price appreciation, a possible cause for concern to policymakers worried about a possible real estate bubble.

According to survey results released by the private China Real Estate Index System late last month, the average housing price in 100 major Chinese cities rose 1% to ¥9 812 per square metre in January from December. This was the second consecutive monthly gain. The survey is conducted with online real estate broker SouFun Holdings and tends to closely approximate official data.

The big release in Japan this week will be Wednesday’s December trade figures from the Ministry of Finance. Economists surveyed by Market News International expect the world’s third largest economy’s exports rose 5% from a year earlier, imports increased 1% and that the trade deficit swelled to ¥1.343-trillion in December, the seventh consecutive shortfall and second largest on record.

In addition to the country’s trade figures, markets will be watching for the possible nomination of a new governor and two deputy governors for the Bank of Japan. Government has said that nominations will be announced before Prime Minister Shinzo Abe begins a visit to the United States on Thursday.

Latin America
Brazil – Latin America’s largest economy – will release the country’s latest retail sales data on Tuesday, proxy gross domestic product (GDP) readings on Wednesday and current account figures on Friday.

Economists expect that retail sales slowed further in December, to 7% year-on-year growth from 8.4% in November. Proxy GDP readings are forecast to show that Brazil’s economy slowed to 0.2% growth in December from 0.4% in November. Analysts at 4CAST expect Friday’s data to reveal that Brazil’s current account deficit widened to $10.9-billion in January from $8.4-billion in December, the largest on record.

Mexico – the region’s number two economy – will release fourth quarter GDP figures on Monday. The Bank of Mexico estimates GDP grew 3.3% in the October to December period compared to a year earlier, but private sector forecasts are less optimistic. Analysts surveyed by Dow Jones forecast 3% growth. For 2012 as a whole, economists have predicted 3.9% year-on-year growth, just below government expectations for a 4% expansion.

Mexico’s statistics agency, Inegi, will separately report December’s indicator of global economic activity, a monthly GDP proxy, on Monday. Markets expect the gauge to show a 2.2% rise, down from 4.14% in November.

December’s retail sales figures will follow from Inegi on Thursday. Analysts at 4CAST expect sales to have slowed to 2.6% year-on-year growth in December from 3.5% growth in November.

Finally, on Friday, markets expect data to show that Mexico’s unemployment rate rose to 5% in January from 4.47% in December.

Middle East and Africa
South Africa and Nigeria – Africa’s two largest economies – will release consumer inflation figures this week. Nigeria’s National Bureau of Statistics will release January’s CPI readings on Monday. South Africa’s CPI will follow from Statistics South Africa on Wednesday.

Bank of Nigeria Governor Lamido Sanusi said last week that it expects that inflation dropped into single digits in January after having fallen to 12%, year on year, in December from 12.3% in November. Sanusi said that keeping inflation below 10% for the remainder of the year will be difficult. As a result, he said, the bank is in no rush to lower rates.

In South Africa, consensus is that consumer prices rose 0.6% in January, an acceleration from December’s 0.2% monthly rise. On an annual basis, however, markets suspect that prices climbed 5.7%, year on year, in January, the same rate of increase observed in December. Most analysts expect consumer inflation to temporarily breach the upper end of the South African Reserve Bank’s 3% to 6% target range sometime over the next few months before easing later in the year.

Elsewhere on the continent, Egypt will release December’s foreign trade balance figures on Monday and the country’s unemployment rate on Tuesday. Morocco is expected to release CPI figures this week, Nigeria is expected to release money supply and private sector growth data this week or next and Ghana may release gross reserves between now and the end of February.


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