/ 9 June 2014

Economic week ahead: Mining for luck

Economic Week Ahead: Mining For Luck

South Africa’s newly-minted mining minister will sit down with company and union officials in a last-ditch attempt to end the platinum sector’s long-running work stoppage. But analysts are not optimistic.

Overseas, America’s latest retail sales figures, Europe’s industrial production numbers and a slew of data from China will keep economists and investors on their toes over the coming days. Here is your guide.

Mineral Resources Minister Ngoako Ramatlhodi will host another meeting between platinum companies and unions on Monday in an attempt to end a five-month long strike in the sector. Few are optimistic that a solution will be found, meaning the two sides will be forced to the labour court for arbitration. 

“I am pulling out on Monday if they do not find each other,” Ramatlhodi told reporters in Irene on Saturday. “If they do not find each other, I wish them and South Africa luck.”

The long-running work stoppage led to the largest quarterly decline in mining production in South Africa in almost 50-years and contributed to the country’s 0.6% economic contraction in the first quarter of this year. Statistics South Africa will release April’s assuredly grim mining production numbers later this week.

On Tuesday, the Bureau for Economic Research (BER) at the University of Stellenbosch will release their second quarter business confidence index readings and Statistics South Africa (Stats SA) will report April’s manufacturing figures.

Analysts at 4CAST expect Stats SA’s manufacturing data to show that output slowed to 0.3% monthly growth in April from 0.7% growth in March. South Africa’s manufacturing purchasing managers’ index (PMI) dropped to its lowest level since August 2009 in May, suggesting extremely grim prospects for the sector for some time to come.

Elsewhere on the continent, a series of central bank decisions are expected over the coming days. Policymakers at the Reserve Bank of Malawi will make their announcement on Monday. The central banks of Botswana and Mozambique will follow on Tuesday. An announcement from the Bank Al-Maghrib – Morocco’s central bank – is also expected this week or next.

On the data docket, Mozambique, Senegal, Egypt, Rwanda and Angola will all report May consumer price index (CPI) readings this week. Angola will also report April’s net reserves.

United States
The National Federation of Independent Businesses (NFIB) will release its May small business optimism index on Tuesday. The NFIB’s sentiment gauge rose 1.8-points to 95.2 in April, reaching its best level since 2007. Analysts expect to see further improvement in this week’s report.

On Wednesday, the US Treasury will release its most recent budget report. The government’s figures typically show a budget deficit in May, averaging $102.2-billion over the past 10 years and $129.3-billion over the past five years. Analysts expect a $139-billion figure for last month.

On Thursday, attention will shift to May’s retail sales report. Economists surveyed by Bloomberg expect the Census Bureau’s report to show that sales rose 0.6% last month, up from a disappointing 0.1% rise in April. Less auto sales, purchases likely climbed 0.4% after remaining flat in the previous month.

Weekly jobless claims figures, also due out on Thursday, are also expected to show improvement, likely dropping to 309 000 in the week ended June 6 from 312 000 in the week prior.

Closing out the week, the Bureau of Labor Statistics (BLS)’s May’s producer price index for final demand (PPI-FD) is likely to record a 0.1% increase for May and the Reuter’s/University of Michigan’s consumer sentiment index may rebound from a disappointing showing in May. Consensus is that the index will climb to 83.0 this month after falling from 84.1 to 81.8 last month.

A series of industrial production and consumer inflation updates will dominate Europe’s economic calendar this week. The Czech Republic’s latest consumer inflation data and Turkey’s industrial production figures will get the ball rolling on Monday.

Industrial production updates from France, Italy and the United Kingdom will follow on Tuesday along with consumer price index (CPI) reports from the Netherlands, Norway and Greece.

On Wednesday, Hungary and Russia will report CPI, Romania will release industrial production data and the United Kingdom will release its latest jobs figures. The UK’s data are widely expected to point to continued improvement in the country’s labour market. The unemployment rate probably fell to 6.7% last month, the lowest level since January 2009.

On Thursday, the eurozone’s April industrial production data will take centre stage. Consensus is that output rose 0.5% from a month earlier and 0.9% from a year earlier, an improvement on the 0.3% monthly decline and 0.1% year-on-year decline recorded in March.

The last of the week’s CPI releases will come from France, Romania, Sweden, Ireland and Portugal on Thursday and from Finland, Germany, Austria, Spain, Italy and Poland on Friday.

Investors will also be on the lookout for sovereign ratings updates on Friday. Fitch will update on France and the United Kingdom, as will Standard & Poor’s. Moody’s will release an update on Italy.

China will report May’s consumer and producer price indices on Tuesday. Consensus is that consumer inflation rose 2.4% from a year earlier last month, up from a 1.8% year-on-year rise in April. Producer prices likely fell 1.5% over the same period after declining 2.0% from a year earlier in the previous month.

On Friday, China will release industrial output, retail sales and urban investment figures. April’s industrial and retail data failed to meet analysts’ expectations, confirming for many that China is stuck in a soft patch. The world’s second largest economy grew at its slowest pace in 18-months in the first quarter of this year.

Friday’s numbers are expected to reveal that industrial production rose 8.8% from a year earlier in May, up slightly from an 8.7% rise in April. Retail sales likely rose after 12.2% over the same period after climbing 11.9% in April. Urban fixed investment likely rose 17.1%, year to date.

Elsewhere in the region, the Bank of Japan will conclude a two-day policy meeting on Friday. Economists do not expect any changes to the central bank’s current stance this month as officials weigh the economic impact of April’s consumption tax rise. Any signs that the tax is adversely affecting growth could lead to an expansion of the country’s asset purchase programme over the coming months.

Thirty of 35 economists in a recent Reuters poll said that they expect further policy easing this year. Nearly half expect the next easing to occur in October.