Economic week ahead: Greece's fears, US jobs and SA's GDP

Statistics are expected to show SA's economy slowed in the first three months of 2012, dragged down by poor performance in mining and manufacturing. (Philip Mostert)

Statistics are expected to show SA's economy slowed in the first three months of 2012, dragged down by poor performance in mining and manufacturing. (Philip Mostert)

Statistics are expected to show that South Africa’s economy slowed in the first three months of the year, dragged down by poor performance in the country’s mining and manufacturing sectors.

Elsewhere in the world, Greece’s uncertain political situation will continue to cast a dark shadow over global markets and a key jobs report due in the United States will shed light on the prospects for recovery in the world’s largest economy. From Athens to Tokyo, here are the events likely to move markets in the week ahead.
North America
Markets in the US will be closed on Monday in observance of the country’s Memorial Day Holiday. The shortened trading week to follow is chock-a-block with key indicators.
The week’s major release hits on Friday when government officials issue this month’s employment situation report. Last month’s data – showing a gain of only 115 000 non-agriculture jobs – stoked fears that the US’s economic recovery was faltering.
Economists expect this week’s report to show a gain of 150 000 jobs. The country’s unemployment rate is forecast to hold steady at 8.1%. Another miss would be hugely disappointing news for global markets.
Investors will get a preview of Friday’s figures on Thursday when ADP releases its national employment report, a private sector survey. Analysts expect to see a private payroll gain of 154 000 in May following a 119 000 increase in April.
Elsewhere on the economic calendar, economists expect the Conference Board’s consumer confidence index – scheduled for release on Tuesday – to tick up from 69.2 in April to 69.7 in May, a still soft reading.
On Thursday and Friday, two manufacturing gauges are expected to show some slippage. The Chicago purchasing managers index (PMI) is forecast to fall from 56.2 in April to 56.1 in May. The Institute for Supply Management’s manufacturing index is expected to slide from 54.8 to 54.0 over the same period.
Finally, Friday’s personal income and outlays report is predicted to show that personal incomes and spending both rose 0.3% in April.
Global markets are likely to remain preoccupied by Greece’s uncertain political situation this week. Investors fear that parties opposed to the terms of a bailout package Greece signed with international donors in March will win elections in June, potentially forcing the country out of the eurozone.  
On Monday, markets will react to new opinion polls released on Saturday showing that Greece’s pro-bailout New Democracy party now holds a lead of between 0.5 and 5.7 points over the anti-bailout Syriza party.
Beyond Greece, Europe faces another potentially critical vote this week. Ireland’s referendum on the European fiscal compact – a treaty which would bind its 25 signatory nations to strict budget rules – is scheduled for Thursday. Results are due on Friday.
For the treaty to come into force, 12 of the eurozone’s 17 countries must ratify it. To date, five have done so. Ireland is the only country holding a popular vote. Recent polls point to passage, but the vote is likely to be close.
Investors are also likely to keep a close watch on Spain’s banks this week after Bankia – Spain’s fourth largest lender – and its parent company, BFA, sought an additional €19.0-billion government bailout on Friday.
Markets are worried that the volume of bad loans held by Spain’s financial institutions may be too much for the country’s government to handle, necessitating an international bailout.
Finally, Italy will hold debt auctions on Monday, Tuesday and Wednesday. Disappointing results would add yet another worry to Europe’s long list of woes.
This is a big week for data from Japan, the world’s third largest economy. As a whole, figures are expected to show that the country’s economy is recovering slowly from last year’s devastating earthquake and tsunami.
Officials will release last month’s household spending, retail sales and unemployment figures on Tuesday and industrial output and housing numbers on Thursday. First quarter capital spending data will follow on Friday.
Economists surveyed by Market News International expect to see year on year increases of 2.5% in household spending and 6.0% in retail sales, the third and fifth straight rise for each measure, respectively.
Analysts anticipate no change in the country’s 4.5% unemployment rate, a rise in industrial output of 0.5%, and a 3.5% increase in housing construction starts.
Friday’s capital investment figures are expected to show their second consecutive quarterly gain. Economists forecast a 1.0% year on year gain during the first three months of 2012 following a 7.6% rise in the final quarter of 2011.
Elsewhere in the region, India’s latest gross domestic product (GDP) data – scheduled for release on Thursday – are expected to show that growth slowed to 6.0% in the first quarter of 2012 from 6.1% in the fourth quarter of 2011, the economy’s weakest performance in almost three years.
Finally, Friday will bring the release of PMI readings in China. The figures are expected to confirm that the world’s second largest economy is still losing momentum, despite a series of stimulus moves from the government.
South America
Policymakers from Brazil’s central bank will announce their latest rates decision on Wednesday. Economists surveyed by Bloomberg expect the central bank to cut the key Selic rate from 9.0% to 8.5% – a record low – in the face of slowing growth and mounting risks. The Banco Central do Brasil has cut 350 basis points off the Selic rate since August 2011.
On Thursday, the country will report April’s industrial production statistics. Brazil’s industrial output fell 0.5% from February to March, confounding consensus expectations for a 1.3% expansion. Markets expect this week’s release to show that output fell another 0.5% from March to April.
On Friday, Brazil’s purchasing managers’ index (PMI) is expected to show a slight uptick, but remain below the 50.0 mark separating expansion from contraction.
Elsewhere in the region, Columbia’s central bank is expected to leave overnight lending rates on hold at 5.25% on Monday. Unemployment figures will be reported in Venezuela on Monday, Chile on Tuesday and Columbia on Thursday.
Argentina will report shopping centre sales on Tuesday, supermarket sales on Wednesday and construction activity on Thursday. Chile – the world’s largest copper producer – will report copper production statistics, retail sales and manufacturing index data on Thursday.
South Africa will issue a several key pieces of data this week, likely dominating Africa’s business headlines.
On Tuesday, Stats South Africa will report last quarter’s GDP numbers. Economists surveyed by I-Net Bridge expect the data to show that Africa’s largest economy grew by 2.3% during the first three months of the year, down from 3.2% growth in the fourth quarter of 2012. Economists surveyed by Reuters are expecting to see slightly higher growth of 2.4%.
On Wednesday, the South African Reserve Bank will release private sector credit extension (PSCE) and money supply figures. Economists expect the rate of growth in credit extension to have picked up to 9.25%, year on year, in April from 9.16% in the previous month. The nation’s broad M3 money supply measure is forecast to have registered 7.45% growth last month from 6.65% in March.
On Thursday, Stats SA’s will release the producer price index (PPI) – a measure of price rises at the factory gate – and the South African Revenue Service will issue April’s preliminary trade statistics.
Markets expected the PPI data to show that producer inflation eased to 6.9%, year on year, in April from 7.2% in March. The country’s trade gap is forecast to have grown to R8-billion last month from R5.5-billion in March.
Finally, on Friday, the Bureau for Economic Research will release this month’s PMI. The index is expected to fall further in May after drops in the past two months.
Matt Quigley writes the weekly economic preview for the Mail & Guardian. His roundup of last week’s top economic stories can be found here.
Matt Quigley

Matt Quigley

Matt Quigley writes the weekly economic preview for the Mail & Guardian. His blog on the South African economy can be found at Read more from Matt Quigley

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