Economic week ahead: SA elections overshadow domestic news
South Africa’s election is likely to overshadow most domestic economic news this week, but economists and investors will still keep an eye on a number of events overseas. Over the coming days, the European Central Bank (ECB) and Bank of England will announce their latest policy decisions, the United States and China will update on trade and global markets will continue to monitor the escalating crisis in Ukraine. Here is your guide.
South Africa’s data diary is packed this week. Monday will bring April’s manufacturing purchasing managers’ index readings, first quarter labour force statistics from Statistics South Africa (Stats SA) and housing price data from Absa and FNB.
Economists and investors will be on the lookout for the South African Chamber of Commerce and Industry’s April business confidence index, April’s reserve figures from the South African Reserve Bank and March’s manufacturing data from Stats SA on Thursday, as well as Wesbank’s fourth quarter vehicle market index on Friday. Standard Bank and Absa will release April housing price indices the same day.
Egypt will report April’s consumer inflation readings on Thursday. Following their decision to leave rates unchanged at their April 28 meeting, officials at the Central Bank of Egypt said that the “upside risks to the inflation outlook continue to be contained”.
On Friday, officials at the Bank of Zambia will announce their latest rates decisions. Citing inflationary concerns stemming from the weakening kwacha exchange rate, Zambia’s monetary policy committee raised the country’s benchmark interest rate by 50-basis points in February and by 175-basis points in March.
More policy tightening may be on the cards. Inflation continued to climb in April, reaching its highest level in 43-months. The Central Statistics Office attributed the increase in overall consumer inflation rate, which rose to 7.8% from a year earlier last month – to non-food items.
Elsewhere on the continent this week, Namibia and Uganda are expected to report March money supply figures. Ghana will release March gross reserves. Morocco will release first quarter unemployment statistics. And Tanzania and Senegal will provide April inflation updates.
America’s economic calendar is comparatively light this week. First up, on Monday, the Institute for Supply Management’s non-manufacturing index is expected to show further improvement. The composite index climbed 1.5-points in March and is expected to have edged-up a further 1.1-points into expansion territory in April.
On Tuesday, government data is likely to show that America’s international trade gap narrowed to $40.5-billion in March from $42.3-billion in February.
On Wednesday, Federal Reserve chair Janet Yellen will testify on monetary policy and the central bank’s outlook for the US economy before Congress’s joint economic committee. Data released last week showed that America’s economic growth slowed to an annualised rate of 0.1% in the first quarter.
Weekly jobless claims figures will take centre stage on Thursday. Consensus is that initial claims for unemployment benefits likely dropped to 330 000 in the week ended May 3 from the prior week. Claims figures have been extremely volatile of late, probably as a result of seasonal adjustment factors.
Finally, on Friday, the US labour department’s job openings and labor turnover survey report is forecast to show that there were 4.125-million job openings on the last day of March, down slightly from 4.173-million at the end of February. Wholesale inventories data is likely to show that stock levels rose 0.5% from February to March.
The European Commission will publish its spring economic forecasts for the 28-member European Union on Monday as eurozone finance ministers meet to discuss wrapping up Portugal’s bailout programme. The group is also expected to discuss the possibility of direct recapitalisation of the region’s banks by the European Stability Mechanism.
Later in the week, attention will turn to policy decisions from the European Central Bank (ECB) and Bank of England. Both institutions will make their announcements on Thursday.
The Bank of England is widely expected to leave its benchmark rate on hold at a record low 0.5% and the size of its asset purchase programme unchanged at £375-billion. No change in rates is expected from the ECB either.
Data released last week showed that inflation in the eurozone rose less than economists had expected to an annual rate of 0.7% in April from 0.5% in March. The ECB targets inflation at slightly less than 2.0%.
Consensus is that the ECB will soon take action to stimulate Europe’s moribund economy, by cutting rates further and/or through more unconventional policies. The banks deposit rate currently sits at zero while the lending rate sits at 0.25%. Despite a near universal expectation that action will occur shortly, most economists believe that it will come next month rather than this week.
Mario Draghi – the ECB’s chief – has recently indicated that the central bank is considering the same sort of asset purchase programme – called quantitative easing – used by the US Federal Reserve to push down interest rates. Some analysts believe that policymakers may lower rates once more, however, before resorting to a large bond-buying programme.
Asia Indonesia will release first quarter growth figures on Monday. Consensus is that gross domestic product expanded 1.33%, quarter on quarter, after contracting 1.46% in the three months ended in December 2013. Attention will shift to Australia on Tuesday for the release of the country’s latest trade data and a rates decision by the central bank. Analysts widely expect the Reserve Bank of Australia to leave the country’s benchmark rate on hold at 2.5%.
More trade data – from Malaysia and Taiwan – are on tap Wednesday along with Australia’s March retail trade figures. Economists expect Australia’s retail sales rose 0.5% on a monthly basis, up from a 0.2% gain in February. China – the world’s number two economy – will release last month’s trade data on Thursday. Both exports and imports fell more than expected in March amidst Chinese Premier Li Keqiang’s attempts to stabilise the country’s economy.
Analysts at 4CAST expect that exports rose 3.55% from a year earlier and that imports rose 3.31% over the same period last month, raising the country’s trade surplus to $19.2-billion from $7.7-billion in March. Thursday will also bring rates announcements from Indonesia, Malaysia and the Philippines. All three central banks are expected to leave rates on hold at current levels.
Asia’s economic week will close with trade figures from India and the Philippines, a rates decision in South Korea and inflation data from China on Friday. Analysts are anticipating a slight moderation in China’s consumer inflation to 2.1% from a year earlier in April from 2.4% in March. Producer price inflation is expected to remain in negative territory.