US Federal Reserve policymakers gather for their final meeting of the year, while key data releases around the world will keep markets focused.
Federal Reserve policymakers will gather for their final meeting of the year this week. The big question for economists, investors and officials across the world is whether or not America's central bank will begin to reduce the size of its stimulus programmes now or wait until next year.
Elsewhere in the world, a series of key data releases and central bank decisions in Europe, China and Africa will keep markets focused as 2013 draws to a close. Here is your guide.
South African markets will be closed on Monday in observance of the country's Day of Reconciliation public holiday. No major economic data releases or policy meetings are scheduled in Africa's largest economy during the shortened trading week to follow.
Elsewhere on the continent, Morocco's central bank – the Bank al-Maghrib – will announce its latest rates decision and Nigeria – Africa’s number two economy – will release last month's consumer inflation figures and third quarter trade data on Tuesday.
Morocco's policymakers decided to keep their benchmark rate on hold at 3.0% at their most recent quarterly meeting held in September. Against a backdrop of strong economic growth and stable inflation, officials are likely to do this same at this week’s meeting.
Nigeria’s consumer price inflation declined for the third consecutive month in October, to 7.8% from 8.0% in September. Speaking to Nigeria's Channels Television last week, Ugo Okoroafor – director of communication for the Central Bank of Nigeria (CBN) – said that the bank projects that the inflation rate will decline to below 7%, comfortably within the CBN’s 6% to 9% near-term target band.
Beyond Tuesday’s inflation and trade data, Nigeria's statistics agency will release November's M2 money supply and private sector credit extension data sometime this week or next. Money supply figures are also expected from Tanzania and Ghana by month's end.
Other notable releases on the horizon include last month’s inflation figures from Zimbabwe – expected by Wednesday – and third quarter gross domestic product (GDP) figures from Kenya – expected sometime between December 17 and December 27.
The Federal Reserve’s last policy meeting of the year is the big item on America’s economic calendar this week. The central bank’s policy arm – the Federal Open Markets Committee (FOMC) will wrap-up a two-day meeting on Wednesday. Officials will release their policy statement and forecasts for growth, inflation and employment at 14h00, local time. Fed chair Ben Bernanke’s press conference will follow at 14h30 local time.
The big question on everyone's minds is whether or not officials will leave the size of the bank's asset purchase programme unchanged or scale back on purchases, currently running at a pace of $85-billion per month. According to a recent survey by Bloomberg, 34% of economists polled believe that officials will begin "tapering" this month, an increase from the 17% who said the same one month ago.
Beyond the Fed's meeting, markets will be on the look-out for several key economic indicators this week. Highlights include Monday's industrial production data, inflation figures on Tuesday, housing market readings on Wednesday and Thursday and gross domestic product (GDP) on Friday.
Also this week, in sharp contrast to previous rounds of drama, the US Senate is expected to approve a bi-partisan budget agreement reached earlier this month that would set spending at roughly $1.0-trillion for the current fiscal year, reduce America’s budget deficit by an estimated $23-billion and restore approximately $63-billion in previously scheduled spending cuts over the next two-years. The US House of Representatives already ratified the budget.
Monday will bring flash (preliminary) manufacturing purchasing managers' index (PMI) readings from Germany and France – Europe's two largest economies – as well as services, manufacturing and composite PMI readings for the eurozone as a whole. On balance, markets are anticipating comparatively upbeat news from these forward looking economic indicators.
Germany's manufacturing PMI is expected to edge up to 52.9 from 52.7 last month. Any reading above 50 indicates expansion, while readings below 50 signal contraction. Although France's manufacturing PMI is expected to remain in negative territory, it is expected to show some improvement, likely rising from 48.4 to 49.0.
The eurozone's manufacturing PMI is likely to rise to 51.8 from 51.6. The currency bloc’s service PMI may improve to 51.4 from 51.2 and the region’s composite PMI may increase to 51.9 from 51.7.
On Tuesday, European finance will gather in Brussels to continue discussions of a single resolution mechanism for addressing future banking failures and Mark Carney, governor of the Bank of England, will testify to the House of Lords' economic affairs committee. December investor confidence readings from Germany’s ZEW Institute – expected to show improvement – and November inflation figures from the UK are the big items in the day's data diary.
On Wednesday, the Bank of England will publish the minutes of its December policy meeting and Germany’s Ifo Institute will release its business confidence indices’ results for December. Markets expect the Ifo Institute’s business climate, current conditions and expectations indices to all move higher.
HSBC released flash results of its China manufacturing purchasing managers' index (PMI) on Monday. This closely followed forward looking indicator is one of the earliest releases on China's monthly calendar. The headline reading fell to a three-month low of 50.5 in December from a final reading of 50.8 in November. Consensus had been for an increase to 50.9.
Japan's Ministry of Finance will release last month’s trade data on Wednesday. Markets expect a ¥1.35-trillion deficit, which would be the third largest amount ever recorded. If the forecast proves accurate, November would mark the 17th consecutive month in which the world's third largest economy reported a trade gap.
Also on Wednesday, economists expect the Reserve Bank of India to increase the bank's repo rate by 25-basis points to 7.0% in their bid to battle a frustrating combination of high inflation and lacklustre growth. If the bank does indeed raise rates, Wednesday's meeting would mark the third consecutive meeting at which Governor Raghuram Rajan – who was appointed in September – has hiked rates.
Closing out the week, the Bank of Japan will announce its final monetary policy decisions of the year on Friday. No policy changes are expected. Speaking to Britain's Financial Times newspaper last week, the bank's governor, Haruhiko Kuroda, said that officials will keep their ultra-loose policies in place until inflation stabilises at 2.0%.
Matt Quigley writes the Mail & Guardian’s weekly economic preview. You can follow him on Twitter at @mattquigley.