Economic week ahead: Consumers take centre stage

Growth figures scheduled for release this week may show that the eurozone exited the longest recession in its history during the April to June quarter. Elsewhere on the docket, markets will pay close attention to a series of reports on the state of US consumers and South Africa’s latest retail sales figures. Here is your guide.

Retail sales figures from South Africa and a series of consumer inflation updates from across the continent are the highlights on an otherwise sparsely populated African economic calendar this week.

Statistics South Africa (Stats SA) will report June’s retail sales figures on Wednesday. Consumer spending in the country has become increasingly important in the past few years, now accounting for roughly 65% of economic activity.

Sales increased by 6.2% in May from a year earlier, demonstrating far better growth than the 2.4% year-on-year increase economists had expected. Analysts at 4CAST expect 3.3% growth in June from a year earlier, higher than market consensus for a 2.4% rise on the year.

Retail sales data have been extremely volatile over the past few months and most economists viewed May’s strong numbers as an aberration, not the beginning of an improvement trend. Retail sales increased by just 0.5% on the quarter in the three months to May and consumers are expected to struggle in the second half of the year.

Stats SA will release June’s civil cases for debt, wholesale trade, motor trade and building statistics on Thursday. No major releases are scheduled for Friday.

Nigeria will report its second-quarter trade balance this week. Ghana will report June’s overseas remittances and July’s gross reserves. Angola, Senegal and Zimbabwe are scheduled to report July consumer price index (CPI) readings this week.

United States
US consumers will take centre stage this week. The US Census Bureau will report the July results of its monthly retail trade survey on Tuesday. Sales increased by 0.4% in June, half the rate economists had expected. Analysts polled by Reuters expect this week’s figures to show that the rate of growth in purchases slowed further to 0.3% in July.

US consumers, whose spending accounts for more than two-thirds of the country's economy, remain stressed and cautious as they head into back-to-school season, the second most important shopping season of the year. The pace of recovery in the world’s largest economy is sluggish, unemployment remains high by historical standards and employers slowed their hiring last month.

Against that backdrop, economists and investors will pay close attention to the University of Michigan’s latest consumer sentiment report on Friday. Consensus is for a slight uptick.

In between these two reports, a number of big-name retailers will release second-quarter earnings. Macy’s will report on Wednesday, followed by Nordstrom, Kohl’s and Walmart on Thursday. Markets will pay particularly close attention to their guidance statements.

Walmart, the world’s largest retailer, is forecast to report second-quarter earnings of $1.25 per share, up from $1.18 per share a year earlier. Revenues are expected to have risen to $118.74-billion from $114.30-billion in the same period last year.

Elsewhere on the calendar this week, producer price index (PPI) readings will be released on Wednesday followed by CPI numbers on Thursday along with America’s weekly jobless claims report and the latest industrial production figures. Housing starts data will close out the week on Friday.

Germany’s Centre for European Economic Research (ZEW) will release its closely followed economic sentiment gauge on Tuesday. Consensus is that the index – a measure of investors’ expectation for the coming six months – will rise to 38.5 from July’s surprisingly weak 36.3 reading.

Economists and investors will be on the lookout for second-quarter growth figures for the eurozone, Germany and France on Wednesday. Analysts are optimistic that the worst is past for the long-struggling region, although the continent still has a long way to go to full economic health. The continent’s manufacturing sector appears to be improving after a deep trough and economic reforms in Europe’s periphery are beginning to pay off.

Analysts surveyed by Reuters expect data to show that the 17-member common currency bloc’s gross domestic product (GDP) expanded by 0.2% on the quarter in April to June, an improvement on the first quarter’s 0.2% contraction.

Germany – Europe’s largest economy – is likely to report second-quarter growth of 0.6%, up from 0.1% in the first quarter. France – the continent’s number two economy – is expected to post 0.1% growth following a 0.2% contraction in the January to March quarter.

Wednesday will bring minutes from the Bank of England’s June policy meeting. Markets will be looking for additional insights into policymakers’ thoughts on the bank’s recently announced forward rates guidance. New bank governor Mark Carney has pledged to keep the bank’s benchmark rate at a record low 0.5% until unemployment drops to below 7.0%.

The UK’s June jobless rate will be reported on Wednesday. Consensus is that the unemployment rate remained unchanged at 7.8%, but markets may turn volatile if the report shows a significant drop.  

Japan released second-quarter growth figures on Monday. The report showed that the world’s third-largest economy expanded at an annualised rate of 2.6% in the April to June quarter, much lower than the 3.6% economists surveyed by Bloomberg expected. GDP grew by 0.6% before annualisation, down from 0.9% in the first quarter.

Japan’s preliminary GDP figures are notoriously unreliable. The difference between preliminary and revised figures is often much wider than in other developed countries, sometimes large enough to make a difference between signalling expansion or contraction.

Because of this, government officials have said they will wait for September’s revised figures before making a decision on whether or not and when to pursue a controversial sales tax hike. Nevertheless, today’s disappointing GDP report is likely to embolden those seeking delayed implementation.

The tax rise is planned as the first step toward reducing Japan’s massive public debt. Japan has the biggest debt burden in the industrialised world at more than double the size of annual GDP.

Japan’s Cabinet Office expects the country’s economy to expand by 2.8% in the 2013-14 fiscal year that began in April. The planned sales tax hike could boost GDP by 0.2% in fiscal year 2013-14 as consumers rush to buy goods before the first tax hike in April, but would then subtract 0.6% from growth in fiscal year 2014-15 as shoppers pulled back on purchases.

Japan’s Cabinet Office will release June and April to June machinery orders – a leading indicator of capital spending – on Tuesday. Analysts surveyed by Market News International expect the report to show that core private-sector machinery orders, which exclude demand from electric utilities and ships, to have fallen by 7.5% on the month in June following a 10.5% rise in May.

Core orders for the April to June quarter are expected to show a 5.0% increase on the quarter despite the month-on-month decrease. The second quarter will be the first in five in which orders increased if the forecast proves accurate.

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

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