/ 3 September 2012

Economic week ahead: Put up or shut up

People hold a reading "No cuts in health" as they take part in a demonstration against the Spanish government's latest austerity measures.
People hold a reading "No cuts in health" as they take part in a demonstration against the Spanish government's latest austerity measures.

Markets will have plenty of data – including purchasing managers' index (PMI) readings from the largest economies of Europe, Asia, Latin America and Africa – to digest as they await answers to these questions.

Elsewhere on this week's economic calendar, multiple central banks will announce their latest monetary policy decisions and America will issue a key jobs report. Here is your complete guide to the week ahead.

North America
Friday's monthly employment situation report will dominate the US economic calendar this week. Economists surveyed by Dow Jones expect the report to show that the world's largest economy added a mere 128 000 nonfarm jobs last month – down from 163 000 in July – and well below the number necessary to put a dent in the country's 8.3% unemployment rate.

The consensus forecast among analysts surveyed by Bloomberg is for a total private payrolls gain of 134 000 positions, in line with consensus expectations for an increase of 133 000 jobs in ADP's national employment report, scheduled for release on Thursday along with weekly government unemployment benefit data. Economists expect new filings to drop by 4 000 to 370 000.

Elsewhere on the calendar, Tuesday will bring last month's Institute for Supply Management (ISM) manufacturing index and motor vehicle sales data and July's construction spending figures. Markets expect to see some improvement on all three indicators.

Analysts surveyed by Dow Jones expect the ISM's gauge of manufacturing conditions to have edged up from 49.8 in July to 49.9 in August, just below the 50-mark separating contraction from expansion. Domestic vehicle sales are seen rising to 11.2-million in August from 11-million in July and construction spending is seen increasing 0.5%, month-on-month.

On Wednesday, markets expect a government report on productivity and costs to show that nonfarm business productivity rose at a seasonally adjusted annualised rate of 1.9% in the second quarter, up from 1.6% in the first.

The European Central Bank (ECB) will take centre stage this week as officials gather for a highly anticipated policy meeting. Economists are split in their interest rate forecasts.

Some believe that the ECB will cut its key rate by 25-basis points to 0.50%, but others are equally convinced that officials will leave rates on hold.

Regardless of the decision policymakers take, the financial world will be watching ECB chief Mario Draghi's post-meeting press conference closely. Investors are hoping that Draghi will announce some form of bond-buying programme to assist the continent's debt-laden nations, chiefly Spain and Italy.

Markets believe that, if an announcement occurs, it is likely to take the form a conditional pledge to assist countries if they request formal aid from their European neighbours and agree to certain austerity measures and structural reforms. They are yearning for both action and detail and are likely to react extremely negatively if neither materialises.

In the run-up to Thursday afternoon's meeting, investors will have plenty of economic data to mull over. Notably, on Monday, the eurozone and 14-individual states will release their latest manufacturing purchasing managers' index (PMI) readings.

The eurozone's PMI is seen holding steady at 45.3, well below the 50-mark separating expansion from contraction. Germany, France, Italy and Spain – the eurozone's four largest economies – are expected to post terrible readings as well.

Service sector PMIs will follow on Wednesday and are forecast to be equally grim. The eurozone's services PMI is seen reading 47.5.

This week will bring a slew of data and a rates decision from Australia. On Monday, the Australian Bureau of Statistics (ABS) released July's retail trade data. Sales unexpectedly fell 0.8% from June, the largest decline since October 2010.

On Tuesday, policymakers at the Reserve Bank of Australia will gather to consider interest rates. Markets expect officials to leave rates on hold at 3.5%. Separately, current account data from ABS is expected to show that the country's current account deficit – the amount by which imports of goods, services and transfers exceeds exports – shrank to AUD12.2-billion in the second quarter.

On Wednesday, the Australian Industry Group (AIG) will release this month's purchasing managers' index (PMI) and ABS will release second quarter gross domestic product (GDP) data.

Economists expect to see economic growth of 1%, quarter on quarter.

On Thursday, ABS's August labour force data is expected to show a monthly gain of 11 000 jobs, but the country's unemployment rate is seen edging up to 5.3% from 5.2% in July.

Elsewhere in the region, Monday will bring trade and inflation data from Indonesia, inflation figures from Thailand and trade and PMI data from India. Singapore will follow with PMI figures on Tuesday.

On Wednesday, South Korea will issue final second quarter GDP figures and Thailand's central bank is expected to leave rates on hold at 3%. Malaysia's central bank is forecast to do the same on Thursday. Finally, on Friday, Japan's Cabinet Office will release their latest preliminary leading indicator.

Latin America
On Monday, analysts at 4CAST expect Brazil's purchasing managers' index to improve slightly to 48.9 from last month's reading of 48.7. A similar measure in Mexico – the IMEF's manufacturing index – is also expected to improve marginally from 53.3 to 53.8.

Also on Monday, markets expect trade data in Brazil to show that the region's largest economy saw its trade surplus expand to $3-billion in August from $2.9-billion in July.

On Tuesday, Brazil will release July's industrial production statistics and Mexico will release last month's consumer confidence index figures. Analysts forecast no change on a monthly basis for Brazil's output figures. Economists see Mexico's consumer confidence index rising to 100 from its previous reading of 98.9, the highest level in four years.

On Wednesday, Chile's central bank will release July's economic activity (Imacec) index and Brazil's central bank will release August's commodity price index. Markets expect the Imacec to show that Chile's economy grew 5.5%, year on year, in July. Brazil's commodity index is forecast to post a 2.8% rise for August.

On Thursday and Friday, attention will turn to two of the region's central banks. Markets forecast no change to Peru's 4.25% reference rate on Thursday and no change to Mexico's 4.50% overnight rate on Friday.

Finally, also on Friday, Chilean officials will release last month's consumer price index (CPI) and trade data. CPI is forecast to show a 0.3% monthly rise. The country's trade deficit is expected to grow to $300-million from $95-million in the previous month.

On Monday, investors will focus on South Africa's latest purchasing managers' index (PMI) readings. The country's PMI rose above the 50-mark separating expansion from contraction in July, but sub-indices signalled continuing problems for the sector. Notably, the survey's sponsor – Kagiso Tiso Holdings – said after last month's release that "employment prospects in the local manufacturing industry remain limited."

During the remainder of the week, the National Association of Automobile Manufacturers of South Africa will release August's vehicle sales data on Tuesday, the Bureau for Economic Research will release third quarter business confidence index figures on Wednesday and Statistics South Africa will release July's electricity data on Thursday.

On Friday, the South African Chamber of Commerce and Industry will release its business confidence index for August and the South African Reserve Bank will release last month's statements of assets and liabilities and gold and foreign exchange reserves. Analysts at 4CAST expect gross reserves to have expanded slightly to $49.78-billion from $49.4-billion in the previous month.

Elsewhere on the continent, investors will be watching Kenya's central bank closely on Wednesday. Last week, data showed that the country's inflation rate fell for the ninth straight month in August to 6.09%, its lowest level since February of last year.

Analysts believe this lower than anticipated inflation could pave the way for a large rate cut to Kenya's 16.5% policy rate at this week's monetary policy meeting. This would be welcome news to many in East Africa's largest economy, particularly those in the banking sector.

Matt Quigley writes the weekly economic preview for the Mail & Guardian. You can follow him on Twitter at @mattquigley.