Germany's Angela Merkel and Italian PM Mario Monti. Monti says unless leaders emerge with a convincing blueprint for stemming the crisis
Eurozone leaders will gather in Brussels on Thursday and Friday amid growing concern that time is running out for the troubled region. Markets are hopeful that leaders will recognise the urgency of the situation and finally put their shoulders to the wheel.
In the run-up to the gathering, a series of data releases elsewhere in the world, including here in South Africa, will shed additional light on the toll Europe’s long-running crisis is exacting on the global economy. Here is your guide to the meetings, data releases and other events likely to attract investors’ attention in the week ahead.
North America
Historically, the northern spring is the most important time of year for America’s housing market. This week, investors will get a glimpse at three key economic indicators for the beleaguered sector.
On Monday, analysts surveyed by Dow Jones expect new homes sales data to show a slight uptick in the annual pace of sales from 343 000 units in April to 345 500 in May.
On Tuesday, April’s S&P/Case-Shiller index – which tracks monthly changes in the value of residential real estate in 20-metropolitan areas – is expected to show a 2.2% year on year drop, less than the 2.6% fall reported in March.
On Wednesday, pending home sales data are also expected to improve, rising 1.5% month on month in May after plunging 5.5% in April.
Data releases beyond those covering America’s housing market are expected to paint a grimmer picture. Economists will be paying particular attention to a series of regional manufacturing gauges after similar measures from the New York and Philadelphia Federal Reserve Banks showed disappointing results earlier this month.
The Dallas Fed will release its manufacturing index on Monday. Richmond and Kansas City will follow on Tuesday and Thursday, respectively. In between, on Wednesday, durable goods orders – a national gauge of factory activity – are seen rising 0.4% in May.
Elsewhere on America’s data calendar, analysts expect the Conference Board’s June consumer confidence index – scheduled for release on Tuesday – to show a decline. The University of Michigan’s consumer sentiment index, which follows on Friday, is seen holding steady.
Europe
A critically important gathering of European leaders on Thursday and Friday will keep markets nervously on edge throughout the week ahead.
Italian Prime Minister Mario Monti told Britain’s Guardian newspaper last week that unless leaders emerge with a convincing blueprint for stemming the crisis, there will be “progressively greater speculative attacks on individual countries, with harassment of the weaker countries,” including Italy and Spain, the eurozone’s third and fourth largest economies, respectively.
The costs of bailing out these countries, should the need arise, is estimated at more than €1.0-trillion. This sum would swamp Europe’s rescue funds, potentially destroying the eurozone in the process. The negative implications for the global financial system and economy would be enormous.
At this week’s meeting, leaders are expected to focus on creating a plan and timeline for greater integration of the continent’s banking and fiscal systems.
“I will propose building blocks for deepening our economic and monetary union so that we can show to the rest of the world and to the markets that the euro and the eurozone is an irreversible project,” European Union president Herman Van Rompuy told global leaders at last week’s G20 summit.
Van Rompuy’s task will not be easy. Deep divisions remain between Germany – the continent’s largest economy – and other European countries. Germany supports tighter continental rules on taxation and spending but, to date, has resisted the debt-sharing measures – such as “Eurobonds” – sought by leaders in France, Spain and Italy for fear they would enable the sort of fiscal profligacy that created the continent’s crisis in the first place.
Markets are hopeful that some sort of compromise will emerge, “a determined and forceful move towards a complete European monetary union”, in the words of International Monetary Fund chief Christine Largarde, which would “restore faith in the system”.
Asia
Japan – the world’s third largest economy – will dominate Asia’s economic calendar this week. Officials will release a slew of data on Friday, including retail sales, inflation, employment, household spending, industrial output and housing data.
Analysts surveyed by Market News International predict that May’s retail sales figures will show a 3.0% annual rise, down from a 5.7% uptick in April and 10.3% rise in March. Economists forecast no change in May’s core consumer price index (CPI) – a measure of price rises at the consumer level, excluding volatile food and energy prices.
Japan’s unemployment rate likely held steady at 4.6% last month and the government’s job index – a ratio of job offers to job seekers – is predicted to increase to 0.80 from 0.79 in April, the highest reading since September 2008.
Household spending is expected to have risen for the fourth straight month in May, but industrial output probably declined for the second consecutive month. Economists are expecting to see a 3.0% monthly drop.
Finally, economists are anticipating a fourth straight month of rising housing starts. Analysts expect May’s data to show a 7.0% rise.
Beyond Japan, investors will focus on a series of trade and industrial production data releases scheduled for the week ahead. Thailand will release trade figures on Monday followed by the Philippines, Hong Kong and New Zealand on Tuesday and Thailand on Friday.
Industrial output statistics will be released in Taiwan on Monday, Singapore on Tuesday and in Thailand and South Korea on Thursday.
South America
On Monday, Brazil’s Foundation Getulio Vargas (FGV) will release consumer confidence figures. Analysts at 4CAST expect the index to fall to a reading of 125.0 this month from 127.1 in May, its second consecutive decline.
Brazil – the continent’s largest economy – will remain in focus on Tuesday as investors digest the latest private sector lending data compiled by the country’s central bank. Brazilian President Dilma Rouseff and her administration have been calling on banks to cut their interest rates and increase their lending to boost the country’s slowing economy.
Also on Tuesday, the country’s latest tax collections data is expected to show that receipts were down to BRL78.0-billion in May from BRL92.6-billion in April. Budget balance and government debt figures will follow on Thursday.
Beyond these data releases, Brazil’s central bank is expected to release its quarterly inflation report this week, including revisions to its annual inflation and economic growth forecasts. In March, policymakers cut their forecast for 2012.
Since then, private sector analysts have become increasingly pessimistic in their outlook for the Brazilian economy, but government officials still insist that the world’s sixth largest economy will expand at a faster rate than the 2.7% growth recorded last year.
Africa
A full schedule of data releases and the ANC’s policy conference will dominate South Africa’s economic calendar in the week ahead.
The ANC will meet in Midrand for four days beginning on Tuesday to discuss policy documents ahead of the party’s national conference in Mangaung in December.
Meanwhile, on the data front, Monday will bring March’s mineral statistics and May’s liquidations data from Statistics South Africa (StatsSA). Tuesday will see the release of the South African Reserve Bank’s leading economic indicator, a forward-looking measure of growth at least six months in future. Economists expect the measure to show some slippage.
The Bureau for Economic Research’s second quarter inflation expectations survey and Stats SA’s first quarter financial statistics will follow on Thursday.
Thursday will also see the release of last month’s producer price index (PPI). Markets expect the annual rate of growth in prices at the factory gate to ease to 6.4% from 6.6% in April.
Finally, on Friday, the South African Reserve Bank will release international reserves data, private sector credit extension (PSCE) and money supply data for May and gross external debt figures for the first quarter.
Friday will also see the release of Wesbank’s second quarter vehicle market index, May’s Spark ATM cash index and May’s preliminary trade data from the South African Revenue Service (SARS).
Matt Quigley writes the weekly economic preview for the Mail & Guardian. His blog on the South African economy can be found at thoughtleader.co.za/mattquigley.