Eurozone and US data will dominate the coming week as other nations enjoy a lighter calendar for economic releases for the next seven days. Japanese inflation and the G20 summit in China at the end of the week will also be eyed.
Starting the week on Monday will be the flash PMI readings for the Eurozone for February. Manufacturing PMI for the Eurozone is expected to show activity slowing for a second straight month, coming in at 52.0 in February versus 52.3 the prior month. The services PMI is also forecast to weaken slightly from 53.6 in January to 53.4 in February. Eurozone PMI peaked in December and has gotten to a softer start in 2016, suggesting GDP growth in the first quarter could be even weaker than the lacklustre 0.3% rate recorded in the final quarter of 2015. On Tuesday, the German Ifo survey will be looked at closely following the unexpectedly weak ZEW economic sentiment figures of this week. However, the Ifo Business climate index is not expected to bring much cheer either as it’s forecast to decline to 106.8 in February from 107.3. On Friday, more survey data will follow with the release of the Eurozone Economic sentiment index. The index is expected to show further weakening in business confidence across the Eurozone in February, in line with the other surveys of the week.
In Japan, inflation figures will come into focus on Friday with the release of January CPI numbers. Headline CPI is forecast to ease to 0% year-on-year in January from 0.1% the prior month, putting more distance from the Bank of Japan’s 2% target. The BoJ’s new core measure of inflation, which excludes food and energy, is also not showing any signs of accelerating and is forecast to decline to 0.7% year-on-year in January from 0.8% previously. A weaker-than-expected reading is likely to put pressure on the BoJ for more action as analysts remain sceptical about the effects on inflation of last month’s decision to introduce negative rates.
It will be a busier week for the US, starting with existing homes sales numbers on Tuesday and new home sales figures on Wednesday. Both are forecast to decline slightly in January. On Thursday, the latest durable goods orders data are published. Durable goods orders slumped by 5.1% in December and are forecast to rebound by 3% month-on-month in January. This would be further evidence of a pick-up in US industrial output at the start of the year. Meanwhile on Friday, the second estimate of fourth quarter GDP growth is out and is expected to show a small downward revision of quarterly growth to 0.5% from 0.7% (annualized). Also due the same day are the personal income and spending figures for January. Personal income is expected to keep the pace of recent months and grow by 0.4% month-on-month. Personal consumption has not been as steady though and was flat in December. But it’s forecast to rise by 0.3% in January on signs that US consumer confidence is rebounding from the soft patch at the end of 2015.
The UK will also see the release of 2nd estimates of GDP growth for the final quarter of 2015. The British economy expanded by 0.5% quarter-on-quarter according to the preliminary estimates and most economists are not expecting any revision on Thursday. However, some analysts are forecasting a downward revision to 0.4%, following weaker-than-expected industrial output in the fourth quarter of last year.
Finally, the G20 summit in China on February 26-27 is likely to attract the markets’ attention as world leaders meet to discuss the recent developments in the global economy since the start of the year. The turbulence in financial markets, China’s economy, and oil prices are likely to be some of the topics to be discussed by leaders of the world’s largest 20 economies.
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