For most global markets, this week marks the new year’s first full week of trading. In the West, a series of expectedly upbeat data releases could bolster sentiment in America, but Europe’s continuing woes still cast a long shadow. In the East, investors are hoping that Chinese data will show that the price rises that plagued the country in 2011 will subside in 2012. Here is your guide to the economic events and gatherings likely to drive the markets in the week ahead.
United States
Investors are hoping that a series of data releases scheduled for later this week will show that America’s recovery is continuing to gain speed, despite strong headwinds from Europe.
Last week, housing, retail and labour data all showed improvement. Most notably, America’s unemployment rate dropped to 8.5% in December, its lowest level since February 2009. Nonfarm payrolls increased by 200 000 in the month, beating analysts’ expectations and recording their biggest rise in three months.
The first of this week’s significant data releases is scheduled for Thursday, when America’s census bureau will announce retail survey results for December. Retail spending accounts for roughly two-thirds of the nation’s economy, so economists and investors watch this data closely.
Analysts surveyed by the financial news and data provider Bloomberg expect December’s figures to show a monthly increase of 0.4% following 0.2% growth in November. Economists surveyed by Dow Jones are predicting slightly less robust growth of 0.3%.
Later in the day, business inventories data for November is expected to show a monthly increase of 0.5% following October’s 0.8% build-up. Businesses generally prefer to keep stock levels low to minimise costs. Rising inventories can signal that they are expecting future sales to increase.
On Friday, government figures are expected to show that America’s international trade gap – the amount by which the country’s imports exceeded its exports — rose slightly from $43.5-billion in October to $45-billion in November. A separate data release covering import and export prices in December is expected to show that import prices increased 0.1% in the month and that export prices rose by 0.3%.
Finally, the University of Michigan’s consumer sentiment index is expected to continue its improvement from a reading of 69.9 in December to a strongly positive 71.5 in January. Consumer sentiment is directly tied to consumer spending so continued improvement in this indicator would be welcome news to America’s economically important retail sector.
Europe
German data and bond auctions, a meeting between the leaders of the continent’s two economic powerhouses and a central bank gathering will likely dominate European economic news in the week ahead.
Germany, the continent’s largest economy, will release industrial production and trade statistics for November on Monday. Although Germany’s economy has held up comparatively well in the face of sharply deteriorating conditions throughout the rest of the region, most economists are not optimistic about either set of figures.
Last Friday, German factory orders data showed their largest decline in almost three years, dropping 4.8% in November. Economists surveyed by Reuters expect industrial output statistics to disappoint similarly, predicting a 0.5% decline for the month.
November’s trade figures, also set for release on Monday, are expected to show a slight narrowing of the export-oriented economy’s trade surplus from €12.6-billion in October to €12.0-billion in November. Both import and export figures are expected to rise slightly, by 0.7% and 1.1% respectively.
As markets absorb the information contained in the two releases, Germany will attempt to borrow €4-billion from capital markets. After a previously failed auction in November, analysts are likely to view Monday’s event as a gauge of investor confidence. A second auction of €4.5-billion of five-year bunds — government bonds — will occur on Wednesday.
Finally, on a very busy financial news day for her country, German chancellor Angela Merkel will meet with French president Nicholas Sarkozy in Berlin. The leaders’ working lunch is expected to focus on preparations for an upcoming summit of European Union (EU) leaders at the end of the month, the first of 2012.
On Thursday, attention will shift from Berlin to Frankfurt for the ECB’s first policy meeting of 2012. After two consecutive 25-basis-point cuts, most economists expect policymakers to leave rates unchanged at 1% at this week’s meeting.
Asia
Eagerly anticipated Chinese trade and inflation data will likely dominate Asian economic news in the week ahead.
On Tuesday, China will release import and export figures for December. Independent analysts expect that China’s trade surplus fell from $14.5-billion in November to $8.8-billion in December. But recent comments by the country’s commerce minister, Chen Deming, suggest that official figures may not agree.
Last week, a statement posted on the commerce ministry’s website said that China’s surplus fell from $183-billion in 2010 to $160-billion in 2011. If the statement proves accurate, it would mean that the world’s second largest economy recorded a surplus of $21.6-billion in December. This would mark a four month high.
On Wednesday, analysts will turn their attention to consumer prices. After peaking at 6.5% in July, China’s inflation rate hit a 14-month low of 4.2% in November. Most economists expect to see a further easing of price pressures in December’s data.
Last week, the Bank of China predicted that the country’s inflation rate would fall back below the bank’s 4% target in 2012, averaging 3.5% for the year as a whole. This would be a welcome change from 2011 when China’s consumer price index (CPI) showed average annual price growth of 5.5% for the first 11-months of the year.
Lower inflation in 2012 would allow Chinese central bankers more room to manoeuvre in the face of slowing growth. The Bank of China hiked interest rates three times and raised banks’ reserve requirements six times in 2011 in an effort to combat price rises. Investors are hoping to see a reversal of this policy of monetary tightening in the months ahead.
South Africa
December’s new vehicle sales and production figures and November’s manufacturing data are the key economic releases on South Africa’s economic calendar this week.
On Monday, the National Association of Automobile Manufacturers of South Africa will release new vehicle sales and production data for December. Analysts are likely to pay particular attention to the export figures contained in the release.
Locally built vehicle exports fell by more than 28% in November. One month’s data does not paint a full picture, but analysts fear that reduced demand from Europe may have caused production lines to run below full capacity in December as well. If the situation persists or worsens, job losses in the industry would likely follow. Europe accounted for almost one-third of demand for South African cars and trucks in 2010, worth R37.8-billion.
A similar story could drive Thursday’s manufacturing numbers to disappoint. Statistics South Africa’s previous figures showed that manufacturing production increased by a mere 1.0% annually in October.
- Matt Quigley writes the weekly economic preview for the Mail & Guardian. He is chief executive of African Foresight Network, a former divisional director at the US Treasury Department’s office of the comptroller of the currency and a former policy analyst at the Federal Reserve Bank of Boston.