/ 1 October 2012

Economic week ahead: Taking stock

A Spanish civil guard with his mouth sealed with tape attends a demonstration of public service workers against government's spending cuts in Sevilla.
A Spanish civil guard with his mouth sealed with tape attends a demonstration of public service workers against government's spending cuts in Sevilla.

Here is your guide to the economic events likely to drive markets in the week ahead.

North America
Friday's all-important monthly employment situation report will dominate America's economic calendar this week. Analysts surveyed by Dow Jones expect the release to show that the world's largest economy added 115 000 non-farm jobs last month, up slightly from 96 000 in August. The country's unemployment rate is expected to remain unchanged at 8.1%, the 44th month above the 8% mark.

Markets will have plenty of other data to mull over this week as they wait for Friday's jobs numbers. On Monday, the Institute for Supply Management (ISM)'s manufacturing index – a forward-looking indicator of economic activity – is expected to slip slightly from 49.6 in August to 49.5 in September. Any reading below 50 indicates contraction.

On Tuesday, last month's vehicle sales figures are seen remaining flat at 14.5-million units. Motor vehicle sales are viewed by economists as a strong indicator of trends in consumer spending.

On Wednesday, the ISM's non-manufacturing purchasing managers' index (PMI) is seen slipping to 53.3 in September from 53.7 in August and ADP's September jobs survey is seen rising 155 000, down from 201 000 in August. ADP's survey is seen as a useful predictor of Friday's official figures.

On Thursday, America's latest weekly unemployment claims numbers are forecast to rise to 369 000 from 359 000 in the prior week. Separately, factory orders, which rose 2.8% in July, are seen falling 6% in August.

To America's north, Canada will release industrial inflation data on Monday, PMI readings on Thursday and employment data on Friday.

Monday is manufacturing purchasing managers' index (PMI) day in Europe. Markets will get a glimpse of managers' perceptions of business conditions in Ireland, Sweden, Norway, Poland, Turkey, Spain, the Czech Republic, Switzerland, Italy, France, Germany, Greece and the eurozone as a whole. The picture they paint is likely to be ugly, pointing to continuing economic contraction across much of the continent.

The eurozone's PMI is expected to remain below the 50-mark separating expansion from contraction for the 13th month in a row. Germany – the continent's largest economy – is seen holding steady at 47.3 and France – the continent's second largest economy – is expected to remain unchanged at an abysmal 42.6.

Later this week, investors will turn their attention to the European Central Bank (ECB). Mario Draghi, the bank's chief, will announce the ECB's latest rates decision on Thursday. With Europe's economy continuing to deteriorate, speculation is mounting that a rate cut is likely by year's end, but not this week.

As a result, reporters are likely to focus their post-meeting press conference questions on the bank's recently announced Outright Monetary Transactions (OMT) programme, an unlimited bond-buying programme designed to lower borrowing costs for Europe's deeply indebted governments. In order for the OMT to begin, a government must formally request a bailout package.

The ECB's announcement of the programme was seen as potential relief valve for Spain, but the country has not yet requested a bailout. Markets will be watching closely to see if it does so this week.

PMI readings in China – the world's second largest economy – and India will dominate Monday's economic news in Asia. Later in the week, central bank decisions in Australia and Japan will take centre stage.

The Reserve Bank of Australia (RBA) will announce its latest rates decision on Tuesday. The Bank of Japan (BOJ) will follow on Friday.

In their most recent meeting minutes, policymakers at the RBA indicated that a rate cut is possible by the end of the year. Analysts believe that a 25-basis point cut to the bank's 3.5% overnight lending rate is the most likely course of action, but are split on its timing.

Some economists believe that officials will wait until they have seen third quarter inflation data before making a decision. Others think governors will not wait, acting now to spur consumer spending and a lacklustre housing market. Japanese officials are widely seen leaving the bank's near-zero lending rate unchanged.

Elsewhere in the region, Monday will bring trade data from South Korea, India and Indonesia. Indonesia, Thailand and South Korea will report inflation readings and Japan will release the country's vehicle sales.

On Tuesday, Singapore will report electronics and manufacturing PMIs and, on Wednesday, Australia will issue trade figures and the Asian Development Bank will publish its latest development outlook.

On Thursday, Australia and Hong Kong will report on retail trade and, on Friday, Taiwan and the Philippines will release inflation figures, Malaysia will release trade figures and Thailand will report foreign reserves.

Latin America
Monday is a busy day for Latin American. Markets will receive trade data and PMI readings from Brazil, manufacturing and non-manufacturing index readings from Mexico's Institute of Finance Executives (IMEF), inflation data from Peru, tax revenues from Argentina and vehicle sales figures from Venezuela.

Analysts at 4CAST expect Brazil's trade surplus to have dropped slightly in September, but for the country's PMI to point to expansion for the first time in six months. Mexico's gauges are also seen signalling expansion, though at a lower rate than in the prior month.

In Peru, markets are forecasting a 3.58% year on year rise in the country's benchmark consumer inflation gauge, the Lima metropolitan area's consumer price index (CPI). Officials at the country's central bank expect the CPI to fall below the 3% upper limit of their target range later this year.

On Tuesday, Brazil will release industrial production figures and Venezuela will release CPI readings. Industrial output in Brazil is seen rising – by 2%, on a seasonally adjusted basis – for a third straight month in August.

On Wednesday, Chile and Argentina will release vehicle sales numbers. Brazil and Columbia's vehicle sales numbers will follow on Thursday along with the Columbia's latest producer inflation and tax revenue data and Mexico's consumer confidence numbers. Mexico's consumer confidence index is seen rising to 98.5 in September from 97.7 in August.

Finally, on Friday, Chile's Imacec economic activity index is forecast to rise 5.7%, year on year, in August, up from 5.3% in July.

South Africa and Nigeria will make their debuts on two benchmark global indices this week, likely triggering billions of dollars in increased foreign investment into Africa's two largest economies.

Beginning Monday, 12-South African bonds with a market value of $93.8-billion will be included on the 22-country Citigroup World Government Bond Index. Also on Monday, JP Morgan Chase – the world's largest underwriter of emerging market debt will begin including Nigeria in its Global Bond Index – Emerging Markets (GBI-EM).

Monday will also bring the release of this month's purchasing managers' index (PMI) from the Bureau for Economic Research in South Africa. Markets expect the index to fall just below the 50-mark separating expansion from contraction. Nigerian markets are closed on Monday in observance of the country's Independence Day holiday.

In the shortened trading week to follow, officials in the continent's largest oil producer will showcase Nigeria to the world. The country's International Investment Forum 2012 will take place in Lagos from Wednesday until Friday.

Elsewhere on the continent, Egypt – the continent's third largest economy – will report foreign reserves figures this week and Uganda's central bank will announce its latest rates decision on Tuesday. Markets expect the bank's monetary policy committee to make further cuts to the bank's 15% benchmark central bank rate (CBR) following a 200-basis point cut in September. Officials have cut rates six times this year, bringing the CBR down 800-basis points in the process.

On Friday, the South African Reserve Bank will issue its latest report of reserves.

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