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Economic week ahead: SA's latest inflation data

Matt Quigley

The SA Reserve Bank forecasts consumer inflation in the continent's number two economy will average 6.3% in 2014. Here's your economic week ahead.

Officials expect that inflation will exceed the upper threshold of the reserve bank's 3% to 6% inflation target band in the second quarter of this year. (Aaron Ufumeli)

South Africa's latest inflation figures are the big item on the domestic data docket this week. Elsewhere on the continent, policymakers in Egypt and Botswana will announce their latest interest rate decisions. 

Overseas, manufacturing snapshots from China and Europe will be closely scrutinised this week, as will a series of high profile corporate earnings reports in the United States. Here is your guide.

Africa
The economic week ahead should be relatively quiet in Africa. The only significant releases on the continent's data docket are consumer inflation reports from Morocco on Monday and South Africa on Wednesday. 

South Africa's consumer price index (CPI) rose 5.9% from a year earlier in February and is widely expected to have held steady in March. The South African Reserve Bank forecasts that consumer inflation in the continent's number two economy will average 6.3% in 2014. 

Officials expect that inflation will exceed the upper threshold of the central bank's 3% to 6% inflation target band in the second quarter of this year, peak at 6.6% in the fourth quarter and drop below 6% by the second quarter of 2015. 

In addition to these two reports, markets will be keeping an eye on the central banks of Botswana and Egypt over the coming days. The Bank of Botswana will announce its April monetary policy decision on Tuesday. The Central Bank of Egypt's deposit and lending rate announcements will follow on Thursday. 

Botswana's central statistics office released March's CPI data on April 15. The latest data showed that country's inflation rate was 4.4%, year on year, last month, comfortably within the central bank's 3% to 6% target range. As a result, policymakers are likely to hold rates steady this week.

Egypt's consumer inflation also remained stable in March. Egypt's central bank is therefore likely to maintain its accommodative monetary policy stance in the near term in an attempt to boost economic growth.

United States
As in Africa, America's economic data diary is particularly quiet this week. Despite the dearth of data, investors will receive plenty of information to absorb over the coming days.  

Earnings season will kick into full gear this week. Nearly a third of the S&P500 components are scheduled to report earnings. Big names include Apple, Facebook, McDonald's, Microsoft and Netflix. 

Highlights of the economic calendar itself include two housing market reports – existing home sales data from the National Association of Realtors on Tuesday and new home sales figures from the government on Wednesday – followed by durable goods orders on Thursday and a consumer sentiment snapshot on Friday. 

Economists expect that the pace of existing home sales contracted for the seventh time in eight months to a seasonally adjusted annualised rate of 4.56-million units in March from 4.60-million units in February. New home sales, conversely, probably rose last month to a seasonally adjusted annualised rate of 455 000 units from 440 000 in February. Supply has been thin in the housing market, holding down sales. 

Durable goods orders – a measure of how busy factories are likely to be over the coming months – likely rose 2% in March, down from a 2.2% monthly rise in February. Excluding transportation orders – which are more volatile – the pace of orders likely picked-up to 0.9% last month, an improvement on February's 0.2% gain.

Finally, the Reuters/University of Michigan's consumer sentiment index is likely to slip marginally to a reading of 82.5 on Friday from 82.6 in March. 

Europe
Europe's data week will begin with flash consumer sentiment readings on Tuesday. Although still in negative territory, consumer confidence has been steadily improving and is currently sitting at its highest level since the global financial crisis. Analysts expect further improvement this month.

On Wednesday, manufacturing purchasing managers' index (PMI) readings for the eurozone and its two largest component economies – Germany and France – will take centre stage. This April data is the first indicator of economic performance in the second quarter. 

Given concerns over deflation in Europe, economists will be paying particular to the price data contained in the reports. In a worrying sign, March reports showed manufacturers lowering prices on the goods they sold to consumers. Markets will be watching to see if the trend continued in April. 

On Thursday, attention will turn to Germany – Europe's largest economy – for the Ifo Institute's sentiment indices. Analysts expect to see slight improvements in the institute's business climate, current climate and expectations gauges. 

Closing out the week, the UK's latest retail sales figures are likely to show that spending – excluding auto fuel – fell 0.5% on a monthly basis in March, down from a 1.8% rise in February. The UK's economy has been outperforming most of continental Europe and consumers have been a big driver of this. 

Beyond this data, investors will continue to keep a wary eye on Ukraine over the coming days. Tensions have been mounting in the eastern region of the country since Russia's invasion of the Crimean peninsula. 

Asia
Wednesday's HSBC China manufacturing purchasing managers' index (PMI) report is the big item on Asia's economic calendar this week. This forward-looking economic indicator is widely expected to strengthen slightly, but remain below the 50-mark separating expansion from contraction. 

Also on Wednesday, Thailand's central bank will announce its latest interest rates decision. Officials cut rates in March after months of political turmoil in the country, but consensus is that policymakers will leave the country's benchmark rate on hold at 2% this week. 

Later in the week, Japan's Ministry of Internal Affairs and Communications will release March's inflation readings for the world's number three economy. Economists surveyed by Market News International expect the data to show that the national core consumer price index (CPI) rose 1.4% from a year earlier last month. If the forecast proves accurate, March would mark the ninth consecutive month in which prices rose and the highest year on year gain since October 2008. 

Beyond these data releases, US President Barack Obama will be in Asia this week. The leader of the world's largest economy will meet with Japanese Prime Minister Shinzo Abe on Thursday. The proposed Trans-Pacific Partnership – a free trade agreement – is expected to feature prominently in their discussions. 

Obama will fly to Korea for meetings with President Park Geun Hye on Friday. He will proceed to Malaysia and the Philippines subsequently before returning to Washington on April 29.


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