Economic week ahead: Scot watch

Three of four recent opinion polls showed a majority of Scots oppose a break-up of their 307-year old union. (AFP)

Three of four recent opinion polls showed a majority of Scots oppose a break-up of their 307-year old union. (AFP)

Economists and investors will be on the look-out for rates announcements from the US Federal Reserve and South African Reserve Bank this week. Both institutions are widely expected to begin tightening policy. The question is, when?

Meanwhile, Scots head to the polls this week to determine the future of the United Kingdom.
Investors could get jittery in the run-up to Thursday’s vote. Markets loathe uncertainty, which a vote in favour of independence would certainly create. 

Economists and investors will be on the lookout for a rates decision from Ghana’s central bank on Wednesday, South Africa’s on Thursday and Nigeria’s on Friday. In the run-up to these announcements, markets will watch for August consumer price index (CPI) updates from Angola on Monday, Nigeria on Tuesday and South Africa on Wednesday. 

In South Africa, the majority of economists surveyed by Reuters earlier this month forecast no change to the country’s 5.75% repo rate this week. A weak rand and high inflation may force officials into a 25-basis point hike in November, however, despite lacklustre growth prospects. Analysts expect rates to rise further to 6.5% by December 2015 and to 7% by the end of the following year. 

Nigerian policymakers left the country’s benchmark rate on hold at 12% at their most recent meeting. They are likely to do the same this week, but have hinted that rates may come down in the near future. Nigeria’s consumer inflation rate has remained in single digits for 19-consecutive months and gross domestic product (GDP) growth accelerated in the second quarter. 

Beyond these announcements, the continent’s data docket is heavy this week. Statistics South Africa will release July’s retail trade figures on Wednesday. July’s civil cases for debt, wholesale trade, motor trade and building statistics will follow from the agency on Thursday along with third quarter inflation expectation survey results from the Bureau for Economic Research. 

Elsewhere on the continent, July money supply updates are expected from Kenya, Tanzania, Namibia and Nigeria over the coming days. Kenya will also report second quarter GDP.

United States
Last month’s industrial production report will kick-off America’s economic week on Monday. Consensus is that output climbed 0.3% from July and that industry’s capacity utilisation rate climbed slightly to 79.3%. 

Tuesday’s producer price index for final demand will probably show the index remained flat in August after rising a slight 0.1% in July. 

Wednesday’s policy announcement by the Federal Reserve – the world’s most powerful central bank – is the big item on America’s economic calendar this week. Economists and investors expect the Fed’s policy-setting arm, the Federal Open Market Committee, to announce a further $10-billion to $15-billion reduction to their asset purchase programme, remaining on schedule to completely end quantitative easing (QE) next month. 

Fed-watchers will also parse the language of the group’s post-meeting announcement. They will be looking for the possible removal of one phrase in particular: officials’ oft repeated pledge to keep rates low for “a considerable period” after the end of the QE programme. Rates have remained near zero since December 2008, but are widely expected to begin creeping up next year. 

On Thursday, August’s housing starts data will likely show that builders broke ground on slightly over a million homes last month. Permits for new construction probably remained flat. 

The eyes of Europe – and indeed the rest of the world – will be on Scotland this week. Voters will head to the polls on Thursday to determine whether or not they wish to remain in the United Kingdom. 

Four opinion polls were released over the weekend. Three showed a majority of Scots oppose a break-up of their 307-year old union while one showed the pro-independence side ahead. 

A survey conducted on behalf of the “Better Together” campaign showed the group up by 54% to the “yes” side’s 46% support. A poll for the Observer showed a slightly narrower 53% to 47% bias against independence. A Sunday Times survey showed an even narrower lead for the “no” side, 50.6% to pro-independence’s 49.4%. 

A survey commissioned by the Sunday Telegraph that excluded undecided voters put the “yes” campaign in the lead by an eight-point margin, finding 54% for independence and 46% against. 

Voters are not the only ones divided on the subject. In an article for the New York Times earlier this month, Nobel laureate Paul Krugman cautioned Scots against a break-up. 

“I have a message for the Scots,” he wrote, “Be afraid, be very afraid. The risks of going it alone are huge.” 

His fellow Nobel-winning economist, Joseph Stiglitz, argued in the Scotsman on Sunday that there is “little basis for any of the forms of fear-mongering that have been advanced” by Krugman and others. 

“Independence may have its costs – although these have yet to be demonstrated convincingly,” he wrote, “but it will also have its benefits.”

Compared to the rest of the world, Asia should be relatively quiet over the coming days. The region’s week will open with India’s latest trade data on Monday and close with an update from Thailand on foreign reserves on Friday. In between, investors will watch for policy decisions from Thailand and Malaysia and for minutes from the Reserve Bank of Australia’s August meeting. 

Beyond these central banks, Asia-watchers will keep an eye on meetings between Chinese President Xi Jinping and Indian Prime Minister Narendra Modi mid-week. Xi Jinping will head to India on Wednesday to discuss trade and other matters with his newly elected counterpart. 

Also on Wednesday, Japan’s finance ministry will release the country’s latest trade figures. Economists surveyed by Market News International expect the data to show that Japan recorded a 26th-consecutive monthly trade deficit in August. The median forecast calls for a ¥1.03-trillion gap, up from ¥962.1-billion shortfall in July. 

On Thursday, finance ministers and central bankers from the world’s 20-largest economies, the G20, will gather in Australia for three days of talks. Separately, agriculture ministers from the Asia Pacific economic cooperation forum will head to China for two days of discussions on the region’s food security.

Matt Quigley

Matt Quigley

Matt Quigley writes the weekly economic preview for the Mail & Guardian. His blog on the South African economy can be found at Read more from Matt Quigley

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