Deteriorating economic data from across the globe has left investors clamouring for more stimulus measures from the world's central banks. As a result, bad – but not catastrophic – data, to the extent that it raises expectations of policy action, could produce counterintuitive market results in the current environment.
Analysts expect plenty of negative data this week, but will be watching to see just how grim things appear. Will things be just bad enough to prompt policy responses? Speculation on that question will be as important as the figures themselves. With trading volumes likely to be low, volatility is the only guarantee.
North America's data calendar is particularly sparse this week, so markets are likely to take their cues mainly from events overseas.
The US's data week will kick off with consumer credit figures from the Federal Reserve on Tuesday. Economists surveyed by Dow Jones Newswires expect the amount of consumer credit outstanding to have risen by $10.0-billion in June, down from a $17.1-billion rise in May.
On Wednesday, attention will shift to the Bureau of Labour Statistics's second quarter labour productivity and unit labour costs. Productivity is seen rising 1.2%, after falling 0.9% in the previous three months of the year. Unit labour costs are seen rising 0.4%, down from a 1.3% rise in the first quarter.
On Thursday, weekly jobless benefit claims are expected to edge up to 370 000 from 365 000 in the previous week. The US's trade deficit is seen narrowing to $47.6-billion in June after swelling to $48.7-billion in May.
Finally, on Friday, government figures are likely to show that the US's federal budget deficit widened to $99-billion in June, up from $59.7-billion in June 2011. Separately, Labour Department figures are expected to show that import prices remained flat in June.
In Canada, in an otherwise light week for data, markets will be watching for building permits data and PMI readings on Tuesday and housing starts, house price index and merchandise trade figures on Thursday. On Friday, employment data is expected to show that the country's unemployment rate edged up to 7.3% in July from 7.2% in June.
Last week, countries across Europe posted abysmal purchasing managers' index (PMI) readings. The continent's five largest economies, for example, reported results well below the 50-mark separating expansion from contraction.
Germany's PMI dropped to 43.0. France posted its worst reading in 38-months. The United Kingdom's PMI sank to its lowest level since March 2009 and Italy's measure slipped from 44.6 to 44.3. Spain's measure rose slightly, but output and new orders continued to decline sharply.
In the wake of these terrible forward looking measures, markets will scrutinise Europe's latest industrial output measures particularly closely.
The Czech Republic will release industrial production figures on Monday. Output figures from Hungary, the Netherlands, Italy, Norway and the United Kingdom will follow on Tuesday. Spain, Turkey and Germany will keep things rolling on Wednesday and France and Romania will close out the week's industrial data deluge on Friday. Economists expect more grim news.
Beyond these economic indicators, markets will be watching bond yields – an indicator of government borrowing costs – in Spain and Italy closely. Yields fell significantly two weeks ago after European Central Bank (ECB) chief Mario Draghi stoked speculation that he might announce a resumption of the bank's Securities Markets Programme (SMP) – a bond-buying initiative designed to lower borrowing costs – at last week's post-meeting press conference.
He did not, citing German opposition to the plan. Both countries' bond yields spiked sharply. Yields came down again on Friday, as markets speculated that a compromise may soon emerge, but the situation is far from resolved.
China will dominate Asia's economic news this week as officials in the world's second largest economy release retail sales, industrial output, fixed asset investment, inflation, trade, money supply and lending data.
On Thursday, markets expect retail data to show that sales rose 13.5%, year on year, in July, down slightly from 13.7% growth in June. Industrial output likely expanded by 9.8%, up from 9.5% in June. Fixed asset investment levels – a key component of China's economic expansion over the past decade – are expected to have edged up to 20.6% growth, year to date, from 20.4% at the end of June.
China's producer price index (PPI) and consumer price index (CPI) are also scheduled for release on Thursday. Markets expect CPI data to show that consumer prices rose by 1.7% in July, down from 2.2% in June and well below the government's 4.0% target. Prices at the factory gate, which fell by 2.1% in June, are expected to have fallen by 2.6% last month.
Low inflation is welcome news to government officials looking to enact additional stimulus measures in the face of slowing growth. China's economy grew by 7.6% in the second quarter of 2012, its slowest rate of expansion since the first quarter of 2009.
On Friday, government figures are expected to show that China's year on year rate of export growth fell from 11.3% in June to 8.6% in July, that import growth jumped from 6.3% to 9.2% and that the country's trade surplus expanded slightly to $32.6-billion.
On Monday, Brazil – South America's largest economy – will release last month's vehicle exports, production and sales statistics. Vehicle sales jumped in June, after the government cut value-added taxes on car sales, but analysts expect less from July's data.
Fenabrave – a trade association – said last month that sales of cars and light commercial vehicles will likely decrease by 0.4%, year on year, for 2012 as a whole. The announcement marked the second downward revision of sales projections from the group this year.
On Wednesday, attention will shift to Mexico for the national statistics agency's release of May's gross fixed investment figures – a measure of spending on machinery, equipment and new construction. ANTAD – a retailers' association – will release last month's same store sales figures and the country's automotive industry will release July's vehicle sales, export and production data.
Elsewhere in the region, Monday will bring economic activity index readings from Chile and vehicle sales data from Columbia and Venezuela. Chile's copper exports, total exports, imports and trade data will be released on Tuesday along with Venezuela's consumer price index (CPI) – a measure of price rises at the consumer level. Chile's CPI and Columbia's exports data will follow on Wednesday.
On Thursday, Mexico will release CPI and trade data and Peru's central bank will issue its latest monetary policy decision. Markets expect officials to leave the bank's reference rate on hold at 4.25%. On Friday, Argentina will release CPI and wholesale price index data and Peru will report its trade balance.
Mining and manufacturing data releases in South Africa – the continent's largest economy – will dominate the continent's otherwise light economic calendar this week.
On Tuesday, the South African Reserve Bank will release its statements of assets and liabilities and gold and foreign exchange reserves for July. The South African Chamber of Commerce and Industry (Sacci) will issue last month's business confidence indicator.
On Wednesday, Statistics South Africa will release June's mining and manufacturing statistics. Markets expect manufacturing figures to show that output rose 0.4% from May to June, following a 2.7% increase from April to May. On an annual basis, manufacturing output is seen rising 3.1%, down from 4.2% in May.
Elsewhere on the continent, investors in Ghana will be waiting anxiously to see who the next governor of the central bank will be. Last Tuesday, President John Mahama nominated Kwesi Amissah-Arthur – bank's current head – to serve as Ghana's vice-president.
In Nigeria, officials will auction 142.1-billion naira in treasury bills at a bi-monthly debt auction on Wednesday. The maturities of the securities range from three months to one year. The Bank of Kenya will follow on Thursday with a sale of 15-billion shillings of 91-day, 182-day and 364-day treasury bills.
Matt Quigley writes the weekly economic preview for the Mail & Guardian. His blog on the South African economy can be found at here.