Economic week ahead: SA rates decision, inflation data
The Reserve Bank will give its decision on rates and overseas, updates on America’s housing market, forward-looking manufacturing measures in Europe and China, Japanese growth figures and a rates decision from the Bank of Japan are among these week’s highlights. Here is your guide.
On Monday, Francois Groepe – Deputy Governor of the South African Reserve Bank (SARB) – will deliver opening remarks at the 2014 African Banknote Conference in Cape Town. Economists and investors will listen closely for clues to the central bank’s current thinking on growth and inflation ahead of Thursday’s rates decision.
On Wednesday, attention will shift to Statistics South Africa’s latest consumer price index (CPI) figures. South Africa’s consumer inflation rate slowed from 6.4% in August to 5.9% in September, falling within the central bank’s 3.0% t0 6.0% target band for the first time in seven-months.
A sustained slide in oil prices – which fell to a fresh four-year low last week – undoubtedly helped to contain price pressures in October as well. Consensus is that the inflation rate in Africa’s number two economy remained unchanged in October, welcome news to policymakers faced with an economy expected to grow a mere 1.4% this year, the slowest pace of expansion in five-years.
Against this backdrop of easing inflation and lacklustre growth, SARB’s monetary policy committee (MPC) is widely expected to leave the benchmark repo rate unchanged at 5.75% on Thursday. This week’s meeting is the last of the year.
Elsewhere on the continent, Nigeria, Africa’s largest economy, will report second quarter trade figures on Monday. October producer price inflation data will follow from Ghana on Wednesday, the same day Ghanaian Finance Minister Seth Terkper presents the government’s 2015 budget.
Beyond these events, October CPI numbers are expected from Botswana and Morocco over the coming days as are second quarter growth figures from Uganda.
Last month’s industrial production figures will kick-off America’s data week on Monday. Economists surveyed by Bloomberg anticipate a 0.2% month-on-month rise in output, down from 1.0% growth in September.
Next up, on Tuesday, October’s producer price index for final demand (PPI-FD) may show a 0.1% monthly decline, the same rate of change recorded in September. The PPI-FD measures changes in prices received by domestic producers of goods and services.
On Wednesday, the Federal Reserve will release minutes from the Federal Open Market Committee (FOMC)’s October meeting and the Commerce Department will report last month’s housing starts. The housing numbers may show that new construction rose slightly to a seasonally adjusted annualised rate of 1.028-milllion units in October from 1.017-million in September.
More housing data will follow on Thursday. Existing homes sales rose 2.4% in September, but may have slipped by around 0.4% last month.
Also on Thursday, markets will be on the lookout for October’s consumer inflation data, November’s business outlook survey results from the Federal Reserve Bank of Philadelphia and flash manufacturing purchasing managers’ index (PMI) readings from Markit Economics.
Falling petrol prices likely kept inflation in check. Consensus is that CPI less food and energy rose 0.1% month-on-month.
The Philadelphia Fed’s general business conditions index – a gauge of manufacturing trends – may give back some ground. Consensus is for a slip to a headline reading of 18.0 from 20.7 last month.
Finally, Markit’s preliminary PMI may print at 56.5, up from 56.2 in October and comfortably above the 50-mark separating expansion from contraction.
News from Brussels is likely to dominate Europe’s economic headlines on Monday. European finance ministers will meet to discuss additional sanctions in response to Russia’s continuing aggression in Ukraine. Later in the day, European Central Bank (ECB) chief Mario Draghi will deliver his quarterly testimony to the European Parliament.
On Tuesday, attention will turn to the United Kingdom’s latest inflation data and the ZEW Institute’s German investor confidence gauges. ZEW’s current conditions index is likely to deteriorate, but the institute’s economic sentiment measure may show some improvement.
On Wednesday, the Bank of England will publish the minutes from its most recent policy meeting and the ECB’s governing council will hold a non-rate setting meeting.
On Thursday, flash purchasing managers’ index (PMI) releases covering the euro zone and its two largest economies – Germany and France – will take centre stage. Analysts expect the euro zone’s services, manufacturing, and composite PMIs to remain virtually unchanged in expansion territory, as will Germany’s gauges. France’s services and manufacturing indices are likely to continue to signal contraction.
Closing out the week on Friday, global ratings agencies Moody’s, Standard & Poor’s (S&P), and Fitch will release ratings updates for several European countries. Moody’s will update on Denmark and Estonia. S&P will release Netherlands, Switzerland, and Turkey reports. Fitch will comment on Greece.
Japan’s Cabinet Office announced on Monday that the world’s number three economy unexpectedly slipped into recession in the third quarter. The country’s real gross domestic product (GDP) contracted an annualised 1.6% in the three months to September.
Japan’s economy has been struggling to cope with the effects of a consumption tax increase enacted in April, the first since 1997. This week’s news is likely to delay a planned second tax rise scheduled for October of next year.
Officials at the Bank of Japan will gather on Tuesday and Wednesday for their monthly policy deliberations. Governor Haruhiko Kuroda will hold a press conference following the meeting. Despite Monday’s surprisingly disappointing growth news, analysts do not expect Kuruda and his colleagues to raise rates or make changes to the bank’s asset purchase programme.
Japan’s Ministry of Finance will report last month’s trade statistics on Thursday. Economists surveyed by Market News International expect to see a trade deficit of ¥1.022-trillion – a 28th-consecutive monthly gap – and the largest since March of this year.
Elsewhere in the region, China – the world’s number two economy – will release October housing prices on Tuesday. New home prices fell further in September, adding to evidence of a slowdown in the country’s housing market as credit markets tighten.
The HSBC/Markit China manufacturing purchasing managers’ index (PMI) will be released on Thursday. Markets will be watching for a sixth month of expansion after September’s final reading of 50.4, just above the break-even 50-mark.