As policymakers announce rate decisions across Africa, SA's Reserve Bank will release its June Monetary Policy Review.
Central banks are likely to dominate economic headlines over the coming days. Thursday’s European Central Bank meeting is the week’s most anticipated event, but policy meetings will also occur in England, India, Botswana, Uganda, Ghana and elsewhere. Here is your guide.
Central banks are likely to be the big economic newsmakers in Africa this week. Policymakers in Botswana and Uganda will announce rate decisions on Monday and Tuesday, respectively. An announcement from Ghana is expected later in the week.
The Central Bank of Botswana’s monetary policy committee held the country’s benchmark rate steady at 7.5% for a fourth consecutive month at their latest meeting in April, citing balanced risks to inflation and disappointing economic growth. With inflation remaining comfortably within policymakers’ target band, another month without change is likely.
Officials at the Bank of Uganda (BoU) also kept their benchmark rate unchanged at 11.5% at their latest meeting in May. Last month’s decision marked the fifth consecutive month during which the BoU maintained its self-described “neutral monetary stance”. Although the country’s most recent inflation figures indicated that the Ugandan shilling’s recent weakness had not yet filtered through to the real economy, upside inflation risks remain and policymakers may soon change their stance.
Also on Tuesday, the South African Reserve Bank will release its June 2014 Monetary Policy Review. Governor Gill Marcus is likely to speak at a forum following the event.
In Ghana, officials are confronting a difficult dilemma. The country’s currency – the cedi – has depreciated significantly this year and shows no signs of strengthening. This will add to inflationary pressures, as will a recently announced hike to public sector wages. But at the same time, growth has slowed and is likely to slow further as electricity shortages – among other problems – constrain growth this year. As a result, officials may hold off on action at this month’s meeting.
The Institute for Supply Management’s May manufacturing index is the first big item on America’s data docket this week. Analysts expect this forward-looking gauge of economic activity to climb to 55.5 from 54.9 in April. Any reading above the 50-mark indicates an expanding manufacturing sector and healthy economic growth overall.
Next up, on Tuesday, motor vehicle sales and factory orders data will take centre stage. Although total vehicle sales likely fell in May, domestic sales may have risen to around 16.0-million units in May from 12.8-million in April. Factory orders likely rose 0.5% from March to April.
On Wednesday, analysts expect America’s latest international trade report to show that the country’s trade gap expanded slightly to $41-billion in April from $40.4-billion in March. The Automatic Data Processing employment report – also due for release on Wednesday may show that private payroll employment rose 210 000 in May, down from 220 000 in April.
The ADP national employment report, which is computed from a subset of ADP records representing approximately 400 000 US business clients and approximately 23 million US employees working in all private industrial sectors, is viewed by many as a predictor of the government’s monthly employment data due out on Friday.
Consensus is that Friday’s employment situation report will show that total nonfarm payrolls increased by 213 000 last month, down from a 288 000 gain in April. Private payrolls likely rose 215 000, down from 273 000 in the month prior. The report is also expected to show that America’s jobless rate ticked up to 6.4% in May from 6.3% in April.
Rates and policy announcements from the European Central Bank (ECB) and Bank of England are the big focus in Europe this week.
ECB president Mario Draghi and his colleagues are widely expected to do something this week that no other central bank has ever done: cut rates to below zero. Consensus is that, in the face of disappointing growth and worryingly low inflation, the ECB will cut its main refinancing rate – currently standing at 0.25% by 10- to 15-basis points – and cut its deposit rate – currently at zero – similarly.
By moving the central bank’s deposit rate below zero, officials will effectively impose a fee on bank reserves held at the ECB. By doing so, they hope to nudge banks into lending more and help to weaken the euro.
Most economists believe that the ECB will also present plans to help the eurozone’s struggling small- and medium-sized businesses at this week’s meeting. Analysts anticipate a fixed-rate offer of cheap funds to banks – dubbed a longer-term refinancing operation – to encourage more lending. Previous longer-term refinancing operations have injected more than €1.0-trillion into the continent’s banking system.
Over in England, the Bank of England’s monetary policy committee will probably leave its benchmark interest rate unchanged at a record-low 0.5% and make no changes to the size of the central bank’s asset purchase programme. Unlike in continental Europe, the speculation in Britain is that an improved employment and economic outlook may soon force officials to raise rates and reduce stimulus.
HSBC/Markit’s latest manufacturing purchasing managers’ index (PMI) report for India will be released on Monday. The country’s services PMI will follow on Wednesday. In between, the Reserve Bank of India will announce this month’s rates decisions.
Economists surveyed by Reuters expect officials to leave the central bank’s cash reserve rate unchanged at 4% and repo and reverse repo rates on hold at 8% and 7%, respectively.
Officials at the Reserve Bank of Australia are also widely expected to leave their overnight night lending rate on hold at 2.5% following their meeting on Tuesday.
On Wednesday, Australia’s first quarter gross domestic product data is expected to show that the country’s economy expanded 0.9%, quarter on quarter, during the first three months of the year, up from a 0.8% expansion in the final quarter of 2013.
Wednesday will also mark the official beginning of Indonesia’s presidential race. Polls suggest a tight race between Joko Widodo, the governor of Jakarta, and Prabowo Subianto, a former general.
Finally, on Thursday, investors will pay close attention to Thailand’s latest consumer confidence data. Confidence fell to its lowest level in 12-years in April.