Alan Wheatley London
More bricks in the global recovery wall are likely to slot into place in a week that could also yield more clues as to when the US Federal Reserve will start unwinding its exceptional monetary stimulus.
Updated gross domestic product (GDP) figures are usually brushed aside as backward-looking.
But with the timetable for so-called Fed tapering dependent on the flow of data, any upward revision to US second-quarter GDP growth can only strengthen the hand of those who expect the central bank to move as early as its policy meeting ending September 17.
Economists polled by Reuters reckon GDP expanded at a 2.2 percent clip between April and June, up from an initial estimate of 1.7 percent thanks to a bigger contribution from net exports.
The US economy is far from firing on all cylinders. But last week data showed home sales for July jumped to a three-year high and the four-week moving average for new jobless claims fell to the lowest level in nearly six years.
Sam Bullard, an economist with Wells Fargo, said he still thought, after the minutes of July’s policy-making Federal Open Market Committee meeting, that Fed chairman Ben Bernanke would start to ease off next month.
“At least on the economic data front, the numbers are gradually improving and the plan that Bernanke laid out at the June [committee] meeting for potential tapering in the second half of this year still looks as though it’s on pace. We’re still in that September camp,” Bullard said.
To be sure, the Fed has to take account of plenty of headwinds. Bullard cited the risk of a US government shutdown due to wrangling over next year’s Budget.
“If the Fed goes for September, they have to have some faith that there’ll be some resolution to these federal fiscal issues and that they won’t throw their economic growth projections off course,” he said. “It’s not a slam dunk.”
And financial conditions have tightened since the Fed met in July, with mortgage rates yanked higher by rising bond yields.
But Jerry Webman, the chief economist with OppenheimerFunds, said the Fed had talked itself into a position where it would arouse suspicions if it did not start buying fewer bonds in September. It could buy $75 billion (R768bn) a month, say, instead of $85bn.
“At the moment, expect tapering to begin in the middle of September; don’t expect it to be terribly disruptive to financial markets,” Webman said.
Statistics this week from developed economies should partly allay another concern voiced in the Fed minutes – that US export markets are sluggish.
Japan is forecast to report a rebound in industrial output and household spending.
In Germany, economists are pencilling in a rise in the Ifo business climate index for August to 107 from 106.2, as well as a solid rise in retail sales and a dip in the number of jobless.
Data from China have improved lately, and economists expect a modest rise in the official manufacturing purchasing managers’ index, due on September 1, to 50.5 from 50.3.
That would be welcome news to China’s emerging market trading partners.
The currencies of India, Brazil and Indonesia among others have tumbled lately on growth worries and a looming end to ever more cheap dollars printed by the Fed. – Reuters