Europe’s Motor Just Veered Into a Post-Pandemic Ditch – BNN Bloomberg


(Bloomberg) — The full extent of Germany’s industrial decline in 2023 will be revealed in the coming week with a raft of data that’s likely to hit a new post-pandemic low.

Three days of releases are expected to show monthly numbers for exports, factory orders and production in Europe’s biggest economy all fell in December, according to the median forecasts of economists. 

The combined picture may confirm that output from the industrial base long seen as the motor of the region is now running at its lowest ebb since the years after the global financial crisis, apart from the shock of the pandemic.

Industrial heavyweight Siemens AG reports earnings on Thursday, and may provide additional insight into the extent of the manufacturing malaise that’s just one cloud hanging over Germany at a time Chancellor Olaf Scholz’s fractious coalition is in disarray. 

While the government succeeded on Friday in pushing through a new budget for 2024, the need to manage almost without a deficit in 2025, following a court ruling against the use of off-balance sheet funding, is likely to keep the three-party alliance at loggerheads. 

What Bloomberg Economics Says:

“Europe’s largest economy has been flirting with recession for several quarters, but has managed to narrowly avoid one so far. Industrial weakness was likely a main driver of the GDP contraction in the final quarter of 2023.”

—For full analysis, click here

Against such a backdrop, Scholz may be glad to escape Berlin and focus on foreign policy matters when he meets President Joe Biden at the White House on Friday. 

Other officials might find discussing the fate of the economy harder to avoid. Finance Minister Christian Lindner is scheduled to speak in Frankfurt on Monday, and Bundesbank chief Joachim Nagel will be at an event in Paris on Friday. 

Elsewhere, multiple central bank decisions, from Australia to India to Mexico, are likely to see interest rates unchanged, while the Paris-based OECD will update its forecasts.

Click here for what happened last week and below is our wrap of what’s coming up in the global economy.

US and Canada

The US economic data calendar lightens up considerably after a slew of news, including the high-profile monthly jobs report and the Federal Reserve’s first policy meeting of the year. 

On Monday, the Institute for Supply Management issues its services index. Economists project activity among service providers to have grown at a faster pace to start the year.

At week’s end, the government will issue its annual recalculation of the seasonal adjustment factors used to compile the consumer price index. The update covers 2019 to 2023. 

Economists, including Fed officials, will closely monitor changes after the government’s previous recalculation showed upward revisions to 2022 inflation prints.

Meanwhile, investors will watch speaking engagements for the Fed’s Loretta Mester, Neel Kashkari, Susan Collins, Thomas Barkin and Adriana Kugler, with Chair Jerome Powell kicking things off on Sunday night when he appears on CBS News’s 60 Minutes.

Looking north, Statistics Canada will release jobs data for January. The focus is on wage growth, which is still rising at a 4% to 5% yearly pace even as the labor market eases. 

Bank of Canada Governor Tiff Macklem is set to speak in Montreal on the effectiveness and limitations of monetary policy. The central bank will also release a summary of its decision to keep rates steady last month. 

  • For more, read Bloomberg Economics’ full Week Ahead for the US

Asia

The Reserve Bank of Australia meets after slower-than-expected inflation in the final quarter of 2023 spurred speculation over a policy pivot by mid-year. Economists expect the bank to keep its cash rate target steady at 4.35% on Tuesday. 

The focus will fall on comments by Governor Michele Bullock, who’ll hold her first post-meeting press conference as the market weighs prospects for a rate cut in May or June. 

Elsewhere among central banks, Thailand is seen holding rates steady on Wednesday and keeping its options open as inflation may rev up again in the second half. 

On Thursday, the Reserve Bank of India is also expected to keep borrowing costs unchanged.

Japanese wage statistics on Tuesday will help shape perceptions on whether the Bank of Japan will end its negative rate regime in March or April. 

China publishes key inflation data Thursday that will probably confirm deflation gripping the economy, with January’s CPI estimated at minus 0.6% versus minus 0.3% a month earlier. 

Some expect Beijing to finally pop out stimulus steps ahead of the Lunar New Year holiday to prop up sentiment. 

Headline consumer prices in Thailand are expected to have retreated, and the Philippines also gets an update on price trends. 

Indonesia’s economic growth probably held more or less steady in the fourth quarter, year on year. Other reports include Singapore’s retail sales and Chinese money supply.

  • For more, read Bloomberg Economics’ full Week Ahead for Asia

Europe, Middle East, Africa

It’s a quieter week in the euro zone after a flurry of major rate decisions in the past month. 

Highlights include the release of the European Central Bank’s survey of consumer inflation expectations, and appearances by officials including chief economist Philip Lane and executive board member Piero Cipollone.

Aside from Germany, production reports for December from Italy and Spain are due in the euro area, while further afield, Sweden, Norway, Denmark, Hungary and the Czech Republic will publish equivalent data. Inflation in Hungary and Norway will also be released.

Following Sweden’s Riksbank decision to pivot toward rate cuts this year, Governor Erik Thedeen will testify in Parliament on Tuesday. Minutes from the meeting will be published the following day. 

  • For more, read Bloomberg Economics’ full Week Ahead for EMEA

The calendar features a number of central bank decisions in Europe: 

  • With the global tide turning toward rate cuts, Icelandic officials on Wednesday will reveal their first decision of 2024.
  • Polish policymakers the same day are anticipated to stay on hold.
  • On Thursday, the Czech central bank is expected to cut rates.
  • Serbian officials will reveal if they want keep borrowing costs unchanged.

Traders on Monday will keenly watch Turkey’s inflation numbers for January. Analysts predict it remained steady at about 65%. The central bank reckons price growth will start to slow around the middle of the year. The shock resignation of the country’s monetary policy chief and replacement with her deputy late on Friday may distract investors, though.

Three central bank decisions are scheduled for Africa on Tuesday:

  • Kenya may leave borrowing costs at 12.5% after a surprise 200-basis-point hike to curb inflation and support the shilling.
  • Neighboring Uganda may cut at a time when slowing price growth making its real rate among the world’s highest.
  • Further east, Madagascar will likely hold rates steady amid inflation concerns.

Latin America

The coming week will see January consumer price data from Brazil, Chile, Colombia and Mexico following Peru’s Feb. 1 report that inflation slowed to within a whisker of the target range.

Colombia may see a near 100 basis-point tumble in the headline reading, Brazil’s print is expected to hit the target range for a third straight month, and analysts forecast a 14th-straight month of slowing in Chile. 

It’s Mexico where the disinflation trend may wobble as some analysts project a move back up toward 5%.

Early in the week, the central banks of Colombia and Brazil post the minutes of their January monetary policy deliberations. 

Banco Central do Brasil left its guidance unchanged, clearly signaling a sixth straight half-point cut in March, while Banco de la República de Colombia delivered a cautious 25 basis-point cut with dovish-sounding post-decision statements.

At this week’s rate setting meetings, Banxico will be in no hurry to cut. Analysts forecast a hold at 11.25%, where borrowing costs have been since last March, but Peru is all but certain to deliver a sixth straight quarter-point cut, to 6.25%, with inflation now just 2 basis points outside its 1% to 3% target range.

  • For more, read Bloomberg Economics’ full Week Ahead for Latin America

–With assistance from Vince Golle, Monique Vanek, Brian Fowler, Piotr Skolimowski, Robert Jameson, Paul Wallace and Laura Dhillon Kane.

©2024 Bloomberg L.P.





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