The week ahead may remind many economists and investors of a comparatively simpler time when central bank meetings and economic data releases, not contagion risks and collective action clauses, moved markets. Here is your guide.
United States
Retail sales, inflation, consumer sentiment and industrial production statistics will share centre stage with a meeting of America’s central bank this week.
On Tuesday, government officials will release last month’s retail sales numbers. Retail spending accounts for roughly a third of all economic activity in the world’s largest economy, so markets watch these figures closely.
Economists surveyed by Bloomberg expect figures to show that retail sales rose 1.1% in February. If this consensus forecast proves accurate, it would mark the largest monthly increase in sales in five months, another encouraging sign for America’s largely consumer-driven economy.
A slew of positive data released over the past few months has lead many analysts to conclude that America’s recovery finds itself on increasingly solid footing. As a result, few expect the Federal Reserve to announce further stimulus measures at this week’s meeting, also scheduled for Tuesday. Nevertheless, investors will scour the bank’s post-meeting statement for any hint of future action.
On Thursday, economists surveyed by Reuters expect producer price index (PPI) data to show that producer prices rose 0.5% last month, up from a 0.1% increase in January. Excluding food and energy prices, however, core PPI is expected to have risen only 0.2%, down from January’s 0.4% increase.
Friday’s consumer price index (CPI) data is expected to show that consumer prices rose 0.4% last month, up from a 0.2% increase in January. Core CPI is expected to have notched up a 0.2% gain, the same rate of increase as in January.
The University of Michigan’s consumer sentiment index — which has been rising steadily since August of last year — is expected to show a further increase from a reading of 75.3 in February to 76.0 in March.
The Federal Reserve’s index of industrial production is also expected to show improvement. Economists expect industrial production to have increased 0.5% from January to February.
Europe
Last week, Greece reached a deal with the overwhelming majority of its private sector creditors to shave roughly €105-billion off its public debt. The agreement clears the way for the Eurogroup — which includes euro zone finance ministers and the president of the European Central Bank (ECB) — to give final approval to a €130-billion bailout package for the deeply troubled country at their meeting in Brussels on Monday.
With the threat of an imminent Greek default removed, European markets are likely to turn their attention to several important data releases scheduled for release throughout the week ahead.
On Tuesday, Germany’s Zentrum für Europäische Wirtschaftsforschung (ZEW) economic sentiment index — a leading indicator of business conditions and expectations in the continent’s largest economy — is expected to extend its positive run.
ZEW’s index far exceeded analysts’ expectations last month, rising from a reading of -21.6 in January to one of 5.4 in February. Economists forecast further improvement to above the 10.0 mark in March. Any reading above zero indicates optimism.
On Wednesday, initial claims for jobless benefits in Britain are expected to increase by another 7 000 this month. The country’s unemployment rate is forecast to remain unchanged at 8.4%.
Also on Wednesday, the euro zone’s harmonized index of consumer prices — the ECB’s principal measure of inflation — is expected to show that prices rose at an annual rate of 2.7% in February, well above the central bank’s price stability threshold.
Finally on Wednesday, eurozone industrial production statistics are expected to show a monthly rise of 0.7% for January. This would represent a significant improvement over November’s 1.1% decline.
Asia
Central bank meetings in Japan and India will likely dominate Asian economic news in theweek ahead.
On Monday, the Bank of Japan (BoJ) will wrap-up its latest policy meeting. Although most economists expect the central bank to leave its interest rate target range unchanged at 0.0% to 0.1%, markets will be watching to see if officials announce further economic stimulus measures.
The BoJ surprised markets last month by announcing plans to expand its asset purchase programme , a means of easing credit to stimulate economic growth in an ultra-low interest rate environment. Policymakers said that they would increase the amount of Japanese government bonds being purchased by ¥10-trillion, bringing the overall size of the programme to roughly ¥65-trillion.
On Thursday, attention will shift to the Reserve Bank of India (RBI). Like their counterparts in Japan, India’s central bankers surprised markets recently by announcing an unexpected policy action of their own.
Last Friday, the RBI cut its cash reserve ratio (CRR) requirement — the share of deposits banks must keep with the central bank — by 75 basis points to 4.75%, a larger and sooner cut than investors had generally expected.
India’s economic growth rate slowed to its lowest level in nearly three years in the fourth quarter of 2011. And in January, the sub-continent’s inflation rate fell to its lowest level in over two years.
Sluggish growth and slowing price prices raised expectations that the RBI would cut its CRR, but most expected policymakers to do so at this week’s meeting. By instead taking action only days before their scheduled meeting, policymakers stokedspeculation that a rate cut is likely on Thursday.
South Africa
House price data from Standard Bank and a series of monthly releases from Statistics South Africa (Stats SA) will dominate South Africa’s economic calendar this week.
On Monday, Standard Bank will release house price information for February. Without adjusting for inflation, the bank’s previous data release showed that the median price of houses in their sample of property increased by 1.6%, year-over-year, in January.
“Standard Bank’s median house price index is expected to remain in the low single digits in 2012 as consumers remain under pressure,” Tebogo Mosepele said in a recent research note posted to the bank’s website.
On Tuesday, markets will watch to see if South Africa’s mining sector, which struggled throughout the second half of last year, managed to improve its performance in the first month of 2012.
Last month’s data release showed that — after five straight months of year-over-year declines in production — the country’s miners increased their output by 0.9% in December. For 2011 as a whole, however, Stats SA’s index of total mining production was down 0.1%. Most analysts expect January to have been another tough month for the sector.
On Wednesday, investors will be watching to see if rising price pressures tooktheir toll on retail spending in January. Retail trade figures surged 8.7%,year-over-year, in December to reach their highest rate of growth in eight months. But most analysts consider December’s strong performance unsustainable given the high food, energy and other costs facing the nation’s consumers.
Finally, on Thursday, Stats SA will release information on civil cases for debt, wholesale trade, motor trade and building statistics. All four releases cover January’s data.
- Matt Quigley writes the weekly economic preview for the Mail & Guardian. He is the chief executive of an economic research and forecasting firm and formerly worked for the US Treasury Department and Federal Reserve Bank of Boston. His blog on the South African economy can be found here.