Economic week ahead: Gordhan’s mid-term budget statement

Finance Minister Pravin Gordhan's mid-term budget statement is the big item on South Africa's economic calendar this week. Markets will eagerly await Wednesday's updated growth and fiscal projections. 

Elsewhere in the world, the US will release its latest monthly employment situation report, the eurozone and China will update on manufacturing prospects and third-quarter corporate earnings season gets into full swing. Here is your guide.   

Africa
The big event on South Africa's economic calendar this week is the government's mid-term budget statement. Gordhan will update his growth and fiscal projections on Wednesday. 

Most analysts believe that Gordhan will reiterate his commitment to curbing government spending and narrowing the country's deficit, despite the upcoming election in April. He is also expected to reduce his 2.7% growth forecast.

In its bi-annual World Economic Outlook, released earlier this month, the International Monetary Fund reduced its 2013 growth forecast for Africa's largest economy to 2% from 2.8%. Officials attributed the downward revision to labour market tensions, weak investment levels and declining confidence. 

Also on Wednesday, Statistics South Africa will report last month's consumer inflation figures. Consensus is that the consumer price index (CPI) recorded a 0.5% monthly increase in September, up from 0.3% in August. On an annual basis, inflation likely slowed to 5.9% last month from 6.4% previously. 

Inflation in South Africa is forecast to average 5.9% this year, according to central bank estimates, below policymakers' upper target of 6%. 

Elsewhere on the continent this week, Morocco will report last month's CPI on Monday and Namibia's central bank will announce its latest monetary policy decision on Wednesday. Money supply updates are expected from Ghana and Tanzania sometime this week as is Nigeria's second quarter current account update. 

United States
The National Association of Realtor's latest existing home sales report will kick off America's data week on Monday. Economists expect the data to show that the pace of sales fell to a seasonally adjusted annualised rate (SAAR) of 5.30-million units last month from 5.48-million in August. 

On Tuesday, attention will turn to September's employment situation report. This release had been scheduled for October 4, but was delayed because of the US government shutdown. Consensus is that nonfarm payrolls rose by 185 000 last month, up from 169 000 in August. The unemployment rate likely held steady at 7.3%. 

On Thursday, weekly unemployment claims figures are likely to show that 135 000 Americans filed for first time benefits in the week ended October 19, a drop of 23 000 from the previous week. 

New home sales figures – also scheduled for release on Thursday – are expected to show that the pace of sales fell slightly to a SAAR of 420 000 units in September from 420 000 in August. 

On Friday, September's durable goods orders report and the University of Michigan's monthly consumer sentiment index will close out the week's economic releases. Orders probably rose by 2.5% on a monthly basis, up from a 0.1% uptick in August. Consumer sentiment is likely to show a slight decline. 

Corporate earnings reports will also feature prominently over the coming days. Nearly 30% of the Standard & Poor's 500 will report earnings this week. Big names on the calendar include Amazon, Boeing, Caterpillar, DuPont, Microsoft, McDonald's and UPS. 

Analysts expect overall earnings growth for S&P 500 companies of 2.1% for the third quarter, down from the 8.5% growth analysts forecast in July. Of the 100 companies that have reported earnings thus far, 53% have beaten expectations. According to a Reuters' estimate, 61% of companies have beaten revenue estimates in a typical quarter over the past 11-years.  

Europe
Economists and investors will be on the lookout for flash (preliminary) purchasing managers' index (PMI) readings for Germany, France and the eurozone as a whole this week. Flash results will be released on Thursday, one week prior to final results. Markets anticipate positive news across the board. 

Consensus is that Germany's manufacturing PMI edged up to 51.5 this month from 51.1 last and that the country's services PMI held steady at 53.7. Readings above the 50-mark indicate expansion, while readings below 50 signal contraction. 

France's manufacturing PMI is expected to cross into expansion territory at 50.2, up from 49.8 last month. The country's services PMI is likely to edge up to 51.2 from 51 previously. The eurozone's manufacturing, services and composite PMIs are all expected to rise slightly as well. 

On Friday, Germany's Ifo Institute will release its closely followed business climate, current conditions and expectations indices. Markets expect the business climate and expectations indices to register slight gains while the current conditions index is likely to hold steady. 

Friday will also bring the first estimate of the UK's third quarter gross domestic product (GDP). The Office of National Statistics's figures are likely to show that the UK's economy expanded by 0.8% in the three months to September, up from 0.7% growth in second quarter and 0.4% in the first. 

On the corporate front, lighting company Royal Philips NV and paint maker Akzo Nobel will report third quarter earnings on Monday. Swiss drug maker Novartis AG will follow on Tuesday. Unilever, Ericsson, Credit Suisse and Daimler will report on Thursday along with French nuclear company Areva, Spanish bank Santander and French retailer Kering. Electrolux and Volvo will close out the week's reports on Friday. 

Asia
Asia's economic week began on Monday with trade figures from Japan. Preliminary customs data showed that the world's number three economy posted a record ¥932-billion trade deficit in September, the 15th consecutive monthly shortfall. 

Imports climbed 16.5% last month from a year earlier to ¥6.9-trillion. Imports rose 11.5% to ¥5.97-trillion over the same period. Japan's currency, the yen, has weakened by nearly 25% against the dollar in the past year. This has made Japan's exports cheaper overseas, but has also raised import costs.

On Wednesday, attention will shift to Australia for last month's CPI inflation readings. Economists forecast a 0.8% monthly increase and 1.8% increase from a year earlier. 

On Thursday, New Zealand will update on trade and HSBC will release flash results from the China manufacturing PMI. 

Finally, on Friday, Japan's ministry of internal affairs and communications will release September's consumer price index. The report is likely to show that Japan is continuing to move toward mild inflation from deflation. 

Analysts surveyed by Market News International expect the release to show that national core CPI rose 0.7% from a year earlier following a 0.8% rise in August. 

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Matt Quigley
Matt Quigley writes the weekly economic preview for the Mail & Guardian. His blog on the South African economy can be found at www.thoughtleader.co.za/mattquigley

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