Economic week ahead: The end of an era
Officials could announce the end of the bold initiative on Wednesday.
Even in the face of moribund growth and record-low inflation, European central bankers have been far more cautious in their response to the continent’s challenges. Friday’s inflation report will likely lead to additional calls for greater action.
Closer to home, South Africa’s latest employment figures and an update on trade will take centre stage. Here is your guide to the meetings, data releases and other economic events likely to drive headlines in the week ahead.
South Africa’s economic week will kick-off on Monday with September’s liquidations tallies from Statistics South Africa (StatsSA) and the BankservAfrica Disposable Salary Index (BDSI). BankservAfrica’s salary payments gauge showed that the average South African’s disposable income declined for the first time since January, suggesting lower retail sales in the near-term.
On Tuesday, StatsSA will release third quarter labour statistics. Unemployment is likely to remain largely unchanged from 25.5% in the second quarter. On Wednesday, the South African Reserve Bank will release last month’s private sector credit extension and money supply figures. Consensus is that credit extension slowed to 8.6% growth from 8.78% in August.
On Thursday, attention will turn to September’s producer price index (PPI) and contract price adjustment provisions (CPAP) work group indices, August’s export and import unit value indices (UVI) and July’s mineral statistics.
The country’s data week will close on Friday with preliminary trade figures from the South African Revenue Service (Sars) on Friday. Analysts at 4CAST expect Sars’ release to show that the country’s trade gap grew to R18-billion last month from R16.3-billion in August.
Elsewhere on the continent, central bankers in Angola and Mauritius will announce their latest rates decisions on Monday.
After cutting the country’s benchmark rate by 50-basis points in July, officials left Angola’s 8.75% policy rate unchanged in September. They are widely expected to do the same this week. Policymakers at the Bank of Mauritius recently stated that they intend to maintain their current policy stance until year end, assuming headline inflation remains at or below 4.0% and year-on-year inflation remains at or below 3.5%. Both conditions were met in September.
A meeting of the Federal Reserve’s policy-setting arm – the Federal Open Markets Committee (FOMC) – is the big event in the world’s largest economy this week. Officials will release their decisions via press statement on Wednesday.
The FOMC is widely expected to reduce the central bank’s monthly asset purchase programme from $15-billion to zero, marking an end to a third round of quantitative easing (QE) begun at a pace of $85-billion per month in September 2012.
Policymakers have repeatedly signaled their intention to keep interest rates low for a “considerable period” after the end of QE. If officials do announce an end to asset purchases, as they almost certainly will, the wording of their pledge will need to be amended. As a result, economists and investors will scrutinise Wednesday’s statement closely for hints of future action.
Beyond the FOMC, America’s data docket is comparatively light this week. Highlights include Tuesday’s durable goods data, Thursday’s gross domestic product (GDP) report and Friday’s personal incomes and outlays (spending) release.
Durable goods orders likely rose 0.9% in September after falling 18.2% in August. Excluding volatile transportation orders, however, orders may have risen 0.5%, down slightly from August’s 0.7% increase. Thursday’s advance print of third quarter GDP may show that America’s economy expanded 3.0%, quarter-on-quarter, in the three months to September, down from 4.6% growth in the previous quarter. Friday’s income and outlays data is likely to show that American’s incomes rose 0.3% in September and that spending increased by 0.1%.
Germany’s Ifo Institute’s closely-followed business climate, current conditions and expectations indices will be released on Monday. Consensus is that the institute’s business climate index may break a six-month losing streak, potentially giving a reason for optimism about the state of Europe’s largest economy after a string of negative releases have stoked concern. Euro zone sentiment indices will follow on Thursday.
The final reading of the currency bloc’s October business climate index is expected to come in at 0.03. The region’s consumer sentiment gauge will probably remain unchanged from last week’s preliminary print of -11.1. Economic sentiment may come in at 99.7 and industrial sentiment at -5.5. On Friday, attention will turn to the euro zone’s latest inflation figures.
Consensus is that Eurostat’s flash inflation figures for October will show a 0.5% year-on-year rise, a modest increase on September’s record-low 0.3% figure. Core inflation will probably show a 0.8% rise from a year earlier, the same as September’s final reading. It is worth noting, however, that Eurostat’s preliminary core inflation estimates can, at times, differ substantially from their final figures. September’s preliminary estimate, for example, came in low and was revised twice.
Eurostat will issue the euro zone’s latest monthly labour statistics on Friday as well. Consensus is that the region’s jobless rate will remain unchanged at 11.5%, high by historic standards but down from record levels. The unemployment rate for those under 25 will probably remain stuck at the much higher rate of 21.6%.
Japan’s monthly data dump will dominate Asia’s economic week. The deluge will begin on Tuesday with last month’s retail sales figures. Economists surveyed by Market News International expect consumer purchases to have risen 0.6% from a year earlier, down from a 1.2% year on year gain in August. Industrial production data – also slated for release on Tuesday – may show a 2.2% monthly rise for September, an improvement on August’s 1.9% decline.
Japan’s Ministry of Economy, Trade and Industry projects a 6.0% gain, but most analysts consider this forecast too optimistic as a high inventory levels likely led to lower output. On Friday, Japan’s Ministry of Internal Affairs and Communications will report September’s consumer inflation, jobless and household spending numbers.
The Ministry of Land, Infrastructure, Transport and Tourism will announce September housing starts. Analysts expect Japan’s national core consumer price index (CPI) – which excludes perishables – to show a 3.0% rise from a year earlier. Excluding the effects of April’s consumption tax hike, this translates into a 1.0% uptick. Japan’s unemployment rate likely remained unchanged at 3.5%.
Household spending may have declined 3.9% from a year earlier in real terms. And housing starts likely fell 17.3% over the same period – a seventh consecutive decline – to a seasonally adjusted annualized rate of 846 000 units. Friday will also bring the latest policy decisions from the Bank of Japan. No change in rates is expected. Elsewhere in the region, investors will be on the lookout for results from two of China’s largest state-owned banks this week. Bank of Communications and Industrial and Commercial Bank of China will both report on Wednesday.