Economic week ahead: Back to work

Both sides appear hopeful that South Africa’s striking platinum workers will finally return to work this week. Elsewhere in Africa, Kenya and Ghana will provide growth updates over the coming days.

Overseas, US data will probably show that the world’s largest economy shrank at the fastest pace in five years in the first quarter, while German inflation data may give policymakers more cause for concern. Here is your guide.

The Association of Mineworkers and Construction Union (Amcu) will hold a mass-meeting at a stadium near Rustenburg on Monday to provide details of a “breakthrough” achieved last week in talks to end the platinum sector’s long-running strike. Both sides appear hopeful that miners – more than 70 000 of whom downed tools on January 23 – will soon be back at work.

Also on Monday, Kenya will release April’s overseas remittances data and first quarter gross domestic product (GDP) growth figures. When presenting government’s budget for the 2014/15 fiscal year earlier this month, Kenya’s Finance Minister Henry Rotich forecast real GDP growth of 5.8% in 2014 and 6.4% in 2015. The country’s GDP expanded 3.9% from a year earlier in the fourth quarter of 2013.

On Tuesday, Statistics South Africa will release the agency’s first quarter employment and earnings report and treasury will auction R2.35-billion of 2031, 2032 and 2041 bonds.

On Wednesday, Ghana will report first quarter GDP. Ghana’s growth slowed to 4.4% in 2013 from 7.9% in 2012, but is expected to rebound this year. The African Development Bank forecasts growth of 7.7% in 2014 and 8% in 2015.

Also this week, Ghana is expected to report May’s gross reserves figures. Namibia and Kenya will likely release last month’s money supply tallies. Zambia will report June’s consumer price index (CPI) and policymakers at Angola’s central bank will announce their June rates decisions.

United States
Data scheduled for release by the National Association of Realtors (NAR) on Monday is likely to show that existing home sales probably increased to their highest level of the year in May as buyers took advantage of low borrowing costs. Consensus is that the seasonally-adjusted annualised rate of purchases rose to 4.75-million units from 4.65-million in the month prior.

On Tuesday, new home sales data is also likely to prove positive. Analysts expect the annualised pace of purchases to have climbed to 441 000 in May from 433 000 in April.

On Wednesday, America’s final GDP figures for the first quarter are widely expected to show that the world’s largest economy contracted 1.8% in the first three months of 2014.

Separate data from the Commerce Department, also due out on Wednesday, is likely to show that durable goods orders probably declined for the first time in four months in May as demand for military equipment ebbed.

On Thursday, additional Commerce Department data is expected to show that US personal spending probably rebounded in May, a hopeful sign that consumers may boost America’s economy in the second quarter. Consensus is that spending ticked up 0.4% in May, a marked improvement on April’s 0.1% pullback.

A series of purchasing managers’ index (PMI) readings are the big items on Europe’s economic calendar this week. As always, economists and investors will scrutinise these forward-looking gauges of economic activity closely.

Indices covering the eurozone as a whole, Germany and France – the common currency bloc’s two biggest component economies – will be released on Monday. Consensus is that the euro zone’s composite PMI will remain unchanged at 53.5. Any reading above 50 signals expansion.

Germany’s manufacturing PMI is expected to rise slightly, but the country’s services PMI may give back some slight ground. Both are widely expected to remain in expansion territory, however. France’s results are not as clear.

France’s manufacturing PMI printed at 49.6 in May while the country’s services PMI came in at a reading of 49.1. Markets will be watching closely to see if either index breaks the all-important 50-mark this month.

Closing out the week on Friday, Germany will release inflation data. Economists expect preliminary data to show that the country’s consumer price index (CPI) rose 0.9% from a year earlier in June, the same rise recorded in May, which was the lowest level since 2010.

Using the European Union’s standard measurement – the harmonized index of consumer prices (HICP) – annual inflation in Europe’s biggest economy probably remained at 0.6% in June, well below the 2% level that the European Central Bank considers as an indicator of price stability.  

Asia’s economic week began with news from China on Monday that the country’s massive manufacturing sector probably expanded for the first time in six-months in June. The HSBC China flash purchasing managers’ index (PMI) rose from 49.4 in May to 50.8 in June, a seven-month high.

Readings above 50 signal expansion. Flash results are based on roughly 85% to 90% of total survey responses and are released one-week ahead of final results.

Commenting on the results, Hongbin Qu, HSBC’s chief economist for China, said: “The improvement was broad-based with both domestic orders and external demand sub-indices in expansionary territory. Inventory reduction quickened, and the employment sub-index also showed signs of stabilisation.”

Looking forward into the week, the next big items on Asia’s data docket will come from Japan at week’s end. Officials will release May’s retail sales figures on Thursday. Household spending data and last month’s consumer price index (CPI) will follow on Friday.

Retail sales probably fell 1.4% from a year earlier in May following a 4.4% decline in April and 11% rise – in the run up to a tax hike on April 1 – in March. Household spending likely fell 2% from a year earlier in May, marking the second consecutive monthly drop following April’s 4.6% pullback.

Economists surveyed by Market News International (MNI) expect national core CPI – which excludes perishables – to have risen 3.4% from a year earlier in May, the greatest rise since 3.5% in April 1982. Excluding the direct impact of April’s consumption tax hike, the rise is estimated to be 1.4%.

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