Investing Guide at Deep Blue Group Publications: Asian and European industrial health under scrutiny this week
(Reuters) - Europe's and Asia's industrial
health will be closely watched in the coming week for an indication
of how solid - or weak - a footing the global economy was on at the start of
the year.
With China's leaders seeking to
rebalance the world's industrial powerhouse more toward consumer spending, and
with bad weather distorting most United States data since the start of the
year, some clarity would be helpful.
After private sector business
surveys suggesting services activity around the world is on the up, investors
and policymakers will shift their focus to industrial production figures for
the euro zone, Britain, Japan and China.
Industrial output growth in
China, the world's second largest economy, is likely to have slowed further in
January from 9.7 percent in December, hurt by weaker local and foreign demand.
Economists in a Reuters poll forecast a decline to a 9.5
percent annual pace, which is still strong and would not yet show the kind of
rebalancing policymakers are looking for. Those figures are due on Thursday.
"China's export growth is
likely to have softened in February after the surge in January due to the
front-loading of exports before the Lunar New Year," said David Mann at
Standard Chartered.
Beijing says it is aiming for
economic growth of about 7.5 percent this year, compared with last year's
actual expansion of 7.7 percent, as it seeks to revamp a maturing economy and
move it towards slower but better-quality growth.
Germany, whose export-driven
economy has been the driving force behind the 18-member euro zone's very slow
recovery from recession, will also publish trade data this week.
"Last year, the German trade
engine spluttered, already suffering from weaker demand from some emerging
economies," said James Knightley, senior economist at ING.
"Ongoing problems in
emerging markets combined with the winter weather in the United States could
make the German export soft patch last longer than expected."
Selling more goods to a swelling
global consumer base in Asia and elsewhere may be just the mix required. But as
long as unemployment in the bloc remains high, there is little prospect for a
strong rebound in euro zone consumer spending.
Industrial production figures for
the euro area are expected to show a healthy rebound in January from December's
0.7 percent decline, according to the latest Reuters poll.
The main Markit Purchasing
Managers' Index rose to its highest in more than 2-1/2 years last month, which
may help explain why the European Central Bank decided to leave policy
unchanged at its March meeting and signal it is content to wait and see.
After the ECB appeared to rule
out any middle-of-the road options, hinting the bank would either do nothing or
else take bold policy action should the outlook deteriorate, there are a host
of its policymakers speaking during the week, possibly offering further
guidance.
In the United States, where jobs
growth was better than expected in February, there is much more certainty about
the trajectory of monetary policy.
For the Federal Reserve to alter
the pace at which it is winding down its massive bond-buying program - 10
billion dollars per month - the U.S. economic outlook would have to change
dramatically, top Fed officials said last week.
One, Atlanta Fed President Dennis
Lockhart, told Reuters in an interview that even a third month of below-par
U.S. jobs growth would not be enough to warrant such a move.
After employers added 175,000
jobs to their payrolls last month, having already created 129,000 new positions
in December, any talk of a change will have been muted.
If anything, U.S retail sales
data due on Thursday are expected to show a return to growth in February after
unseasonably cold weather took its toll the month before.
That could solidify expectations
that the Fed will wind down its bond purchase programme by the end of this year
and consider raising interest rates some time in 2015.
Japan will announce revisions to
its fourth quarter GDP data on Monday - something it is prone to do heavily.
Tokyo said last month the economy expanded 0.3 percent in the fourth quarter,
well below the median estimate of 0.7 percent.
The disappointing data poses a
challenge to Japanese policymakers as unprecedented stimulus efforts have
showed few signs of sparking momentum in consumption and exports. Inflation
also remains dangerously low there.
Central banks in Korea, Indonesia
and Thailand all meet this week, and are expected to leave policy unchanged.
Thai consumer confidence tumbled
to a 12-year low in February, highlighting the toll that prolonged political
unrest, now in its fifth month, is taking on Southeast Asia's second-biggest
economy.
But the Reserve Bank of New
Zealand, well ahead of most developed nations, is nearly certain to lead the
way with a rate hike at its policy review to choke off growing inflation
pressures in its rapidly-growing economy.
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