By Michael J. Casey, Alen Mattich and Michael Arnold
Here are the most important macroeconomic data and policy news events expected in the forthcoming week:
MONDAY
CHINA: Markets, government offices closed for the Lunar New Year celebrations.
BRAZIL: 7 a.m. EST. (10 a.m., Sao Paulo) Markit Economics January manufacturing PMI. [Prev. 50.5.]
This not a closely watched indicator, but like anywhere else in the world the Markit PMI for Brazil has the potential to evolve into a useful measure of business activity. And with so much focus on the market turmoil suffered by the "Fragile Five" emerging markets, of which Brazil is an unwitting member, any fresh insight into the state of this giant South American nation's economy is welcome. The last result showed a very meager rate of expansion (above 50). Did it improve in January? (MC)
U.S.: 9 a.m. EST. Treasury Sec Lew speaks on the debt ceiling at Bipartisan Policy Center, a U.S. think tank.
If this was October 2013, a month of government shutdown and extreme partisanship, this would be a hotly awaited event. But although the reprieve that Congress gave the U.S. government over its debt limit is due to expire on Friday, this time the tension isn't there. Why? Because it seems clear the political costs of going to the mat with the government aren't worth it. Why else would the House have passed a budget deal earlier this year? The consensus is the debt ceiling will rapidly, if quietly increased. But, of course, anything can happen? (MC)
U.S.: 9 a.m. EST. Janet Yellen sworn in as new Federal Reserve Chair.
The end of an era for outgoing Chairman Ben Bernanke, who had one of the most challenging tenures for any Fed chief ever. But it’s also an historic new era, with the first female leader of the Fed to take the helm. Will policy change? Who knows? Most Fed officials say Ms. Yellen is very much cut from the same cloth as Mr. Bernanke. What's clear that she has an enormous job to do: most likely, Ms. Yellen will be responsible for eventually unwinding the massive accommodative monetary position that the Bernanke Fed built up. (MC)
U.S.: 9 a.m. EST. Markit Economics final January U.S. Manufacturing PMI. [Preliminary index was at 56.6 vs. 55.7 in
The preliminary result for this up and coming indicator suggested that the first month of the year enjoyed a further acceleration in business activity. The final number – as well as the Institute of Supply Management's competing number, out an hour later – will affirm whether this is an entrenched trend or not. (MC)
U.S.: 10 a.m. Institute for Supply Management January ISM manufacturing report on business. [Manufacturing PMI expected 56 vs. revised 56.5 in December.]
Economists keep expecting the ISM's measure of manufacturing activity to moderate, but it continues to maintain solid growth. (MC)
U.S.: 10 a.m. December construction spending [Expected+0.2% vs. +1% in November.]
The idea is that the holiday season, mixed with an especially cold snap of ugly weather forced construction activity to slow in December from the rapid pace it saw in November. (MC)
BRAZIL: 12 p.m. EST (3 p.m. in Sao Paulo). January trade balance. [Previous deficit $2.65 billion.]
It's important that Brazil's trade balance starts to turn more favorable. That would signal that the weakness in the Brazilian real has reached a point that it is restoring Brazilian competitiveness and helping it transition into recovery. (MC)
U.S.: 4 p.m. EST. January industry auto sales. [Expected annualized sales 15.7 million vs. 15.4 million in December.]
Car sales ended 2013 on a very strong note, and that's good news for the broader U.S. economy. Did the consumer enthusiasm for new cars continue into the New Year. (MC)
SOUTH KOREA: 6 p.m. EST (8 a.m. Tuesday, Seoul). January consumer price index. [Previous CPI +1.1% on-year; core CPI previously +1.9% on-year].
South Korea’s benign inflation has allowed the Bank of Korea to stay on hold for an extended period while the economic recovery gains some traction. CPI for all of 2013 rose just 1.3%, far below the Bank of Korea’s target range of 2.5%-3.5%. Nothing suggests the BOK will exhibit any greater urgency to raise rates in coming months with price pressures essentially absent. (MA)
AUSTRALIA: 10:30 p.m. EST (2:30 p.m. Tuesday, Sydney). Reserve Bank of Australia cash rate decision [Previously held at 2.5%]
With the non-mining parts of Australia’s economy showing little life, speculation had been growing that the Reserve Bank of Australia would have to cut interest rates again from their current low of 2.5% — something the bank was reluctant to do with the housing market showing signs of an emerging bubble. However, recent strong data suggest that the RBA’s previous eight cuts since November 2011 are beginning to revive the broader economy, meaning the bank is likely to stay on hold now. (MA)
PHILIPPINES: 8 p.m. EST (9 a.m. Tuesday, Manila). January CPI [Previous +4.1% on-year] and core CPI [Previous +3.2% on-year]
The Philippines is one country in emerging Asia where inflation is beginning to become an issue after the consumer price index rose to a two-year high in December. Still, it remains squarely within the central bank's target range and December's rise was largely due to disruptions caused by Typhoon Haiyan, which means the central bank will incline toward patience unless the January print is off the charts. Fourth-quarter GDP data, out last week, suggested that growth has come off a bit from the torrid pace earlier in the year but remains among the fastest in Asia, and will likely be boosted by reconstruction efforts this year. January's CPI print is worth watching closely, but likely won't be enough to force the Bangko Sentral ng Pilipinas into a rate increase. (MA)
TUESDAY
EURO ZONE: 5 a.m. EST (11 a.m. Brussels). December producer price index. [Forecast up 0.2% on the month and down 0.9% on the year vs. -0.1% and -1.2%, respectively, in November]
Input inflation is still worryingly low, but at least the December numbers should show that the downward pressure it’s exerting on consumer prices is startling to relent. Overall, though, the euro zone continues to face deflationary risks. (AM)
U.K.: 4:30 a.m. EST (9:30 a.m. London). January construction purchasing managers’ index [Expected 61.8 vs. 62.1 in December]
Construction is likely to be growing at great guns as the U.K.’s property boom gathers pace. (AM)
U.S.: 8:30 a.m. Federal Reserve Bank of Richmond President Jeffrey Lacker speech at Shenandoah University
Mr. Lacker is considered a hawk. Not a voter on the Fed's Open Market Committee this year. (MC)
U.S.: 9:45 a.m. ISM-New York January ISM-NY Report on Business. [Previously 63.8.]
A very strong result for this third-tier indicator last month. It would not be a surprise if there is a correction lower this time. (MC)
U.S.: 12:30 p.m. Federal Reserve Bank of Chicago President Charles Evans speech at the Detroit Economic Club
Mr. Evans is not a voting member, but as a kind of de facto mouthpiece for the dominant dovish wing of the Fed, his views provide a useful gauge for the Fed's thinking. Are the FOMC members really as sanguine about the emerging market crisis as is suggested in the last statement, with its glaring omission of any reference to the problems in Turkey, Russia, and other developing countries. (MC)
INDONESIA: 11 p.m. EST (11 a.m. Wednesday, Jakarta). Fourth-quarter GDP [Previous +5.6% on-year]
Growth had been slowing in Indonesia from the torrid pace of the past few years even before the central bank raised interest rates by a cumulative 175 basis points following last summer’s taper-related selloff in the rupiah, when it sought to compress imports and choke off inflation. That tightening will likely show up in the form of a further slowdown in the fourth quarter numbers. (MA)
WEDNESDAY
EUROPE: 3:45 a.m. EST -5 a.m EST (9:45 a.m.-11 am, Brussels). Manufacturing purchasing manager indexes for January.
–ITALY [Forecast 48.5 vs. 47.9 in December]
–FRANCE [Forecast 48.5 unchanged on preliminary estimate vs. 47.8 in December]
–GERMANY [Forecast 53.6 unchanged on preliminary estimate vs. 53.5 in December]
–EURO ZONE [Forecast 51.9 unchanged on preliminary estimate vs. 51.0 in December]
–U.K. [Forecast 59.0 vs. 58.8 in December]
The final services PMIs are unlikely to surprise, merely confirming that domestic demand is growing but remains subdued in the single-currency region. The U.K., on the other hand, remains a bastion of consumption. (AM)
EURO ZONE: 5 a.m. EST (11 a.m. Brussels). December retail sales [Expected down 0.5% on the month vs. up 1.4% in November]
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A surprisingly weak retail sales number from Germany last week suggests downside risks for the overall euro zone data release. This will be something for the European Central Bank to chew over at its meeting on Thursday. (AM)
POLAND: N/A Polish central bank meeting [Expected benchmark interest rate to be unchanged at 2.5%]
The Polish central bank is expected to stick with its all-time low interest rate of 2.5% even though the zloty has come under market pressure alongside a general emerging markets rout. But with the economy remaining strong and the zloty’s declines likely to put upward pressure on inflation, hikes are likely to be on the cards in coming months. (AM)
U.S.: 8:15 a.m. Automatic Data Processing January national employment report. [Private payrolls forecast +193,000 vs. +238,000 in December.]
Last month's ADP number threw economists for a loop. It was so strong that it led some to predict a strong result in the official estimate of U.S. payrolls from the Bureau of Labor Statistics. In the end, it seemed like a head fake. Did the ADP numbers or those of the BLS better capture the underlying state of the labor market? Another month of data will help gauge that. (MC)
U.S.: 10 a.m. Institute for Supply Management January non-manufacturing report on business. [Composite index expected 53.5 vs. 53.]
The services sector appears to be in decent shape, although the ISM figures don't capture quite the same breadth of expansion as its manufacturing index. (MC)
U.S.: 12:30 p.m. EST. Federal Reserve Bank of Philadelphia President Charles Plosser speech at annual economic seminar in Rochester, NY.
Mr. Plosser is back on the voting roster. He is a noted inflation hawk. He will almost surely talk of the need to push through the tapering process in a speedy fashion. (MC)
U.S.: 12:40 p.m. EST. Atlanta Fed President Dennis Lockhart speaks in Birmingham, Ala.
Mr. Lockhart is not a voting member. But he is a respected moderate. His analysis is always of the economic situation and of the Fed's monetary policy options is usually insightful. (MC)
AUSTRALIA: 7:30 p.m. EST (11:30 a.m. Thursday, Sydney). December retail sales [Previous +0.7% on-month]
Policy makers have been desperately hoping for signs of life in non-mining sectors of the economy, and strong November retail sales gave hope that the economy is finally exiting its doldrums. Another month of strong sales would help solidify the idea that the recovery is broadening and that the Reserve Bank of Australia can avoid cutting interest rates any further from the current lows. (MA)
THURSDAY
PHILIPPINES: 3 a.m. EST (4 p.m., Manila). Bangko Sentral ng Pilipinas rates decision [Previously held at 3.5%]
The Philippine economy has been the strongest in Asia behind China’s, yet inflation has remained well within the central bank’s comfort zone — even with the recent spike post-Typhoon Haiyan. That means the central bank will likely keep rates on hold for another month while reconstruction efforts get underway in earnest. (MA)
GERMANY: 6 a.m. EST (12 p.m. Berlin). December industrial orders [Expected up 0.3% on the month vs. up 2.1% in November]
German industry is likely to have taken a breather after a blowout November, but the overall trend remains positive coming into the new year. (AM)
U.K.: 7 a.m. EST (12 p.m. London). Bank of England policy meeting [Expected unchanged base rate at 0.5%, unchanged stock of bond purchases at £375 billion]
That the BOE won’t touch rates or its stock of bond purchases is a foregone conclusion. The message from its policy makers has been loud and clear that rates don’t need to rise as long as there remains a large output gap and inflation is under control. But investors will be looking for clues about a shift in guidance on when policy might start to shift given that the unemployment rate is nearly at the BOE’s 7% threshold at which it starts to consider tightening. (AM)
CZECH REPUBLIC: 6 a.m. EST (12 p.m. Prague). Czech central bank policy meeting [Expected key interest rate unchanged at 0.05%]
The Czech central bank is expected to stick to its near-zero interest rate and its targeted currency rate against the euro at CZK27 as it tries to boost its flagging economy. But emerging markets currency weakness could yet cause it to rethink its policy if the crown comes under further pressure. (AM)
EURO ZONE: 7:45 a.m. EST (1:45 p.m. Frankfurt). European Central Bank policy meeting [Expected main refinancing rate unchanged at 0.25%]
Inflation at less than half of its 2% target and unemployment at 12% suggest the ECB needs to do more. Some economists suggest it will look at trimming its policy rate, though there’s not much further it can go toward zero. Others suggest it will launch a program like the Bank of England’s Funding for Lending Scheme to get credit flowing back into struggling economies. The emerging markets currency crisis is also bound to be a topic of discussion for the policymakers as it spreads to Eastern Europe. (AM)
CANADA: 8:30 a.m. December. International merchandise trade. [In November, exports unchanged, imports +0.1%, trade deficit C$940 million.]
Now that its resources sector is no longer creaming the windfall from high commodity prices, Canada's non-commodity exporters are struggling to fill the void. Even with a weaker Canadian dollar and strengthening demand in the country's most important market to the south have not done much good. The widening trade deficit captures that. (MC)
U.S.: 8:30 a.m
–December U.S. Trade balance. [Expected deficit $35.3 billion vs. deficit $34.25 billion.]
In recent months, the U.S. trade deficit has defied expectations and continued to shrink – partly because of the shale energy revolution, which is reducing U.S. reliance on overseas oil, but also because of the "re-shoring" trend where manufacturers have shifted back to the U.S. and are now exporting from there. Higher heating oil demand as the cold winter set may push those numbers back higher again for this and subsequent months. But the overall trend is one of the U.S. lower its dependence on foreign production. (MC)
– Unemployment insurance weekly claims report. [Initial weekly jobless claims expected 338,000 vs. 348,000 week earlier.]
Unseasonably cold weather across large parts of the country may have led to a downturn in construction work and an increase in applications for unemployment benefits last week. But the general trend remains one of a relatively jobless claim picture. (MC)
– 4Q productivity and cost. [Non-farm productivity expected +3%, same increase as in 3Q; unit Labor costs +0.8% vs. +1.4%.
U.S. productivity growth appears to have accelerated along with growth itself in the second half of the year, but it is still well short of the gains it typically showed before the crisis. (MC)
WORLD: 9:30 a.m. EST. International Monetary Fund regular press briefing
The only time people pay attention to this weekly press briefing is when there's a crisis underway. With emerging markets in the midst of some serious selling, maybe it's worth listening to what the IMF technocrats have to say this time. (MC)
U.S.: 10 a.m. EST. Federal Reserve Governor Daniel Tarullo testifies to U.S. Senate committee hearing
Mr. Tarullo tends to focus on regulatory issues and his take on matters such as the Volcker Rule, systemic risks in the shadow banking sector and other problems relating to the too-big-to-fail banks is always valuable. But he doesn't hold that much sway in monetary policy per se. (MC)
AUSTRALIA: 7:30 p.m. EST (11:30 a.m. Friday, Sydney). Reserve Bank of Australia quarterly statement on monetary policy.
The RBA offers its analysis of the economy in the wake of the interest-rate decision earlier in the week. Look for details of how quickly the central bank sees non-mining sectors of the economy picking up the slack as the long resources boom wanes, which will give clues to whether the RBA is able to remain on hold indefinitely. (MA)
FRIDAY
BRAZIL: 6 a.m. EST. (9 a.m., Sao Paulo). Brazilian Institute of Geography and Statistic January consumer price index. [Previously +0.92% on month, +5.91% on-year.]
Although inflation is within the central bank's target band – through which it targets a 4.5% rate with a 2-percentage-point buffer on either side – it continues to hold near the top end of that. That tendency has kept the central bank in a vigilant state, hiking rates repeatedly, despite a sluggish local economy. If Brazil is to prevent the real from getting further sucked into the swirling crisis around the "Fragile Five" emerging markets (of which it is an unwitting member), it must make sure that inflation is totally contained. (MC)
U.S.: 8:30 a.m. EST. January labor report. [Non-farm payrolls expected +183,000 vs. +74,000 in December; Unemployment rate expected 6.6% vs. 6.7% in December.]
Was last month's deeply disappointing drop an anomaly? If so, there should be a big correction in the January numbers. There would also perhaps be a revision to the December figures. (MC)
CANADA: 8:30 a.m. January labor force survey. [Previous net jobs -45,900; jobless rate 7.2%.]
Canada's labor data are especially volatile. But in general they've been painting a somewhat gloomy picture, that's consistent with other economic indicators there. (MC)
U.S.: Time N/A. Suspension of U.S. federal debt limit expires.
It's remarkable how little attention this looming deadline has received so far – certainly compared with all the angst that arose in the leadup to the last deadline in October, when markets had to contend with the actual possibility that the U.S. government might have to default on its debt. The lack of attention this time stems from the fact that Republicans in the House have already crossed the aisle to support a budget for the next fiscal year. To vote not to increase the debt limit would be to deny funding to a budget they supported. There's a sense that the Obama Administration's Republican opponents mostly believe they have more to lose politically than to gain in launching another round of brinkmanship. (MC)
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