/ 18 November 2013

Economic week ahead: Reserve Bank likely to leave rates unchanged

Economic Week Ahead: Reserve Bank Likely To Leave Rates Unchanged

Central banks will feature prominently in this week's economic news. Governor Gill Marcus and her colleagues at the South African Reserve Bank are widely expected to leave rates unchanged at this week's meeting. Policymakers in Nigeria and Japan, who will also announce rates decision this week, are expected to do the same. 

In the US, UK and Australia, economists and investors will be scrutinising the minutes of those banks most recent meetings for hints on the timing of future policy action. Here is your guide to the meetings, announcements, data releases and other events likely to move markets over the coming days. 

Central bank meetings in South Africa and Nigeria – Africa's two largest economies – will dominate the continent's economic calendar this week. 

The South African Reserve Bank is widely expected to leave its benchmark repo rate unchanged at 5% at the conclusion of its three-day policy meeting on Thursday. A stark slowdown in retail sales during September has led to increased speculation that the central bank will hold rates at their current levels for longer in order to protect South African consumers. 

Statistics South Africa reported last week that retail sales declined by 0.7% in September, their worst reading since March. Markets had expected a 0.3% monthly increase in sales. 

The Central Bank of Nigeria (CBN) will wrap up its two-day meeting on Tuesday. Economists and investors widely expect policymakers to leave the bank's benchmark rate on hold at 12%. 

Data release last week showed that Nigeria's annual consumer inflation rate fell to 7.8% in October from 8% in June, comfortably within the central bank's 6% to 9% target range. Despite the further easing of inflation, the CBN's monetary policy committee is unlikely to cut rates because of its focus on maintaining foreign exchange rate stability. 

Beyond these two policy meetings, markets will be on the lookout for several key pieces of economic data over the coming days. Highlights include Egypt's September trade figures on Monday, Nigeria's third quarter unemployment report on Tuesday and South Africa's October consumer price index readings on Wednesday. 

United States
Those looking for hints at when the US Federal Reserve will pare back its quantitative easing programme will have plenty to mull over this week. The central bank will release minutes from the federal open market committee's (FOMC's) October meeting on Wednesday and eight of the committee's 11-voting members will deliver public remarks over the coming days. 

New York Federal Reserve chief and FOMC vice-chair William Dudley and Boston Federal Reserve chief Eric Rosengren will speak on Monday. Federal Reserve chair Ben Bernanke and Chicago's Charles Evans will follow on Tuesday. St Louis's James Bullard will deliver public remarks on Wednesday and Thursday, as will Federal Reserve governor Jerome Powell. Kansas City's Ester George and FOMC member Daniel Tarullo will close out the week on Friday. 

Policymakers decided to leave the size of the Federal Reserve's $85-billion monthly asset purchase programme unchanged at their October meeting, saying they needed to see more evidence that the world's largest economy will continue to improve before reducing support.

Beyond this Federal Reserve activity, markets will be on the lookout for several key economic data releases scheduled for the week ahead. Wednesday will see the release of last month's retail and existing home sales figures. Consensus is that retail sales remained flat in October while the pace of existing home sales probably fell to a seasonally adjusted annualised rate of 5.13-million units in October from 5.29-million units in September. 

On Friday, the US labour department's job openings and labour turnover survey report is likely to show that there were 3.830-million job openings on the last business day of September, down slightly from 3.883-million in August. 

Two closely followed economic sentiment gauges in Germany will serve as bookends to Europe's economic week. The country's closely followed ZEW indicator of economic sentiment will be released on Monday. The Ifo Institute's business climate measure will close out the week on Friday. Analysts expect both indicators to post decent gains for November. 

The Bank of England will release the minutes from last week's monetary policy committee meeting on Wednesday. Given the favourable outlook for both economic growth and inflation, the minutes are likely to show that policymakers were unanimous in their decision to keep policy unchanged. 

Later in the week, global markets will shift their attention to a series of purchasing managers' index (PMI) reports. Reports covering Germany and the eurozone as a whole will be released on Thursday. France's reports will follow on Friday.  

Analysts expect Germany's manufacturing PMI to edge up slightly, to 51.9 from 51.7 last month. The eurozone's composite PMI is likely to rise to a reading of 52 from 51.9 in October. Any reading above the 50-mark signals continued expansion, while a reading below 50 indicates contraction. 

France's manufacturing PMI is likely to show improvement, but remain in negative territory. Consensus is that the index will rise to 49.5 from 49.1 previously.  

Also on Friday, German gross domestic product (GDP) figures are likely to confirm that the country's economy expanded by 0.3% in the three months to September from the previous quarter. 

GDP figures released by Thailand's National Economic and Social Development Board on Monday showed that the country ended its technical recession in the third quarter. GDP rose 2.7% from a year earlier, the data showed, lower than the consensus forecast for 2.9% growth.

On Tuesday, the Reserve Bank of Australia will publish the minutes of its November meeting, at which it left rates unchanged. In addition to these minutes, governor Glenn Stevens may provide further insight into the bank's thinking at a speech to economists on Thursday. 

Japan's ministry of finance will release last month's trade numbers on Wednesday. High oil and gas imports for power generation have continued to outpace a slow recovery in exports in Japan and the world's third largest economy is widely expected to report a record 16th consecutive monthly trade deficit in October. 

Economists surveyed by Market News International expect Wednesday's figures to show a 16.5% rise in exports, year on year, and an 18.9% rise in imports, bringing October's trade deficit to ¥810.0-billion, down from ¥934.3-billion in September. 

On Thursday, the Bank of Japan will conclude a two-day meeting – no policy changes are expected – and HSBC will release flash results for this month's China manufacturing PMI. Analysts expect a slight rise from last month's final reading of 50.9.