/ 28 April 2014

Economic week ahead: SA’s trade and credit data

A series of money supply updates
A series of money supply updates

South Africa’s latest trade and credit extension data are the highlights of this week’s domestic data calendar. Overseas, Federal Reserve policymakers will announce their latest rates decisions, the eurozone will update on inflation and China’s biggest lender reports results. Here is your guide:

Africa’s economic week will begin with central bank decisions in Angola, Egypt and Mauritius on Monday. Egypt’s rates announcement had been expected last Thursday but was postponed to Monday because of a public holiday.

Most economists expect Egypt’s monetary policy committee to keep the central bank’s deposit and lending rates on hold at 8.25% and 9.25%, respectively. Inflation in North Africa’s largest economy held steady in March – after slowing in the three preceding months – but remains comparatively high. As a result, policymakers are unlikely to lower rates in a bid to boost economic growth quite yet.

The latest data available from Egypt’s ministry of planning shows that real gross domestic product (GDP) grew by a mere 1.4%, year-on-year, in the fourth quarter of 2013 and averaged a lacklustre 1.6% growth for the year as a whole.

Beyond these central bank decisions, a series of money supply updates, two inflation reports and South Africa’s latest trade data will dominate Africa’s data docket this week. Kenya, Namibia, Tanzania and Morocco are scheduled to report their latest money supply figures on Monday. South Africa’s money supply statistics, along with Kenya’s and Uganda’s consumer price index (CPI) readings, will follow on Wednesday.

Analysts at 4CAST expect South Africa’s data to show that money supply in the continent’s number two economy grew by 5.7% from a year earlier in March, down from 5.93% in February. Growth in the amount of credit extended to the private sector – also scheduled for release mid-week – probably also slowed, to 8.21% growth from a year earlier in March from 8.67% in February.

Preliminary trade figures, due on Wednesday, are likely to show that South Africa’s trade account slipped back into a slight deficit in March after posting a surprise R1.7-billion surplus in February.

United States
Reports scheduled for release this week may show that US consumer confidence reached its highest level in years this month, that the country’s jobless rate declined further and that consumer spending is picking up.

The Conference Board’s latest consumer confidence figures are likely to show on Tuesday that sentiment reached its highest level in six-years in April. Consensus is for an index reading of 83, up from 82.3 in March and 78.3 in February.

On Wednesday, the Federal Reserve’s policy-setting arm will announce its latest policy decisions. They will meet against a backdrop of steadily improving economic data. Officials are widely expected to leave rates on hold and to continue with gradual reductions to the central bank’s monthly bond buying programme.

The central bank last month abandoned their pledge to link ultra low interest rates to a specific unemployment level. Federal chief Janet Yellen and her colleagues will now consider a “wide range” of information in determining the support they provide to the world’s largest economy.

On Thursday, the Bureau of Economic Analysis’ monthly personal income and outlays (spending) report is likely to show that consumer spending in the US increased by the fastest pace in four months in March. Analysts forecast a 0.6% monthly rise for March, up from 0.3% in February.

Friday’s monthly employment situation report is widely expected to show that US employers boosted their payrolls by the most in five months in April and that the country’s jobless rate consequently declined. Consensus is for a rise of around 205 000 positions and a decline in the unemployment rate to 6.6% from 6.7% in March.

The United Kingdom’s latest GDP figures are due out on Tuesday. Economists expect more good news. Consensus is that the island’s economy expanded by around 1%, quarter-on-quarter, in the first three months of the year. On an annual basis, that would translate into an expansion of around 3.2%.

Across the English Channel, the eurozone’s April inflation figures are the big release on Europe’s data calendar this week. Inflation in the common currency bloc fell to a four year low of 0.5% in March, stoking further fears of deflation.

Economists will be watching Wednesday’s data to see if this ultra low figure was an aberration or indicative of something more fundamental. Consensus is that inflation picked up to 0.8% in April, largely as a result of Easter-related spending.

European Central Bank (ECB) President Mario Draghi has been hinting that he is prepared to step in to head-off deflation if the bank’s medium-term inflation outlook worsens. Most recently, Draghi said that the ECB could launch a broad asset purchase programme, similar to those already implemented by officials in the US, UK and Japan.

On Friday, attention will shift to the eurozone’s latest jobless counts. Analysts expect the region’s unemployment rate to remain unchanged at 11.9%. The number of unemployed in Europe has remained stubbornly high but, lately, has begun to show some divergence between the currency bloc’s component economies. Germany’s labour market, for example, has been steadily improving while France’s has continued to deteriorate.

Data released on Sunday showed that Japan’s retail sales rose 11% in March as shoppers hurried purchases in advance of an April 1 tax hike. Sales totaled ¥13.7-trillion in March, the second-highest amount on record after ¥14.6-trillion in March 1997, which was the month before the most recent consumption tax increase.

No major events are scheduled for Monday but Industrial and Commercial Bank of China (ICBC) – the world’s largest bank by asset size – will report first quarter earnings on Tuesday. Markets will scrutinise the bank’s results for signs that the number of bad loans in the world’s second largest economy continues to grow.

The latest data available from the China Banking Regulatory Commission shows that non-performing loans have increased for nine consecutive quarters, reaching their highest level since 2008 in December. China Business News reported earlier this month that bad loans – which totaled ¥100-billion in 2013 – reached ¥60-billion in January and February 2014 alone.

On Wednesday, attention will shift to Japan for the Bank of Japan’s latest rates decision and press conference by Governor Haruhiko Kuroda. No significant policy changes are expected. The central bank will also release its semi-annual economic outlook on Wednesday, containing officials’ updated growth and inflation forecasts for the 2014 and 2015 fiscal years along with new forecasts for the 2016 fiscal year.

On Thursday, all eyes will return to China for April’s official manufacturing purchasing managers’ index (PMI) readings. This forward-looking indicator of economic activity fell to its lowest level in nine months in March, but is expected to rebound slightly in April.

Consensus is that the index will rise to 50.5 from 50.3. Any reading above the 50-mark indicates expansion.

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