- Services PMI surveys to provide more colour on global growth trends
- Australia, Malaysia and ECB monetary policy GDP figures in Australia, Japan, South Korea and Europe
- Special report on copper demand and global growth
The worldwide release of February service sector PMI surveys will provide more colour to global economic developments and inflation trends during the first quarter. Monetary policy meetings in Australia and Malaysia will meanwhile also be in focus amid increasing expectations for Asian central banks to reverse tighter monetary policy. The European Central Bank will likewise decide on monetary policy.
Key official data releases include Australia’s GDP figures as well as updates to growth estimates for Japan, South Korea and the Euro area. In Asia, other notable data releases included trade data in China, Taiwan and Malaysia. Elsewhere, financial markets will keep an eye on US nonfarm payroll and unemployment data.
Our special report this week looks at what the near-ten year low in the output of heavy copper users means for global growth.
Australia monetary policy and GDP
While the Reserve Bank of Australia is expected to keep monetary policy steady in its next meeting, analysts will scour the policy statement for insights into the direction of the next policy move. There are increasing expectations of a lower policy rate amid subdued inflation, falling domestic house prices and a global growth slowdown. As of end-February, financial markets are pricing in a rate cut at year-end. As such, upcoming economic data will be closely watched, such as the fourth quarter GDP data that are coming out in the same week, particularly household consumption.
Providing a more up-to-date view into economic growth in early 2019 are updates to the February Commonwealth Bank Australia composite PMI surveys. Flash PMI had signalled a dip in private sector business activity in February; the first such drop in the near three-year survey history.
Malaysia
Bank Negara Malaysia decides on monetary policy in the coming week, with a rate hold widely expected. Governor Nor Shamsiah Mohd Yunus recently commented that the bank sees the current policy settings as appropriately accommodative, although they will continue to assess the situation. The return of deflation in January stemmed from an administrative cut in domestic fuel prices, and is therefore unlikely to warrant a change in monetary policy. Furthermore, prices are expected to pick up by mid-2019 when the GST-removal impact fades. However, IHS Markit sees some room for a rate cut if private consumption deteriorates substantially.
Brexit and the ECB
In Europe, markets will be watching Brexit negotiations as the UK’s scheduled departure from the EU on 29th March looms closer. An extension whereby the departure is delayed looks increasingly likely, but more will become evident during a series of votes in the week commencing 11th March. Services and construction PMI data will be eyed for signs of the impact of Brexit uncertainty on the UK economy.
Meanwhile, European growth has slowed sharply, leaving the European Central Bank in a difficult position. Having halted its asset purchase programme in late 2018, the ECB is now likely to have to revise down its growth forecasts for the euro area in 2019 from its current 1.7% expectation, reflecting a recent sharp slowdown (the Eurozone PMI is indicating a mere 0.1%-0.2% expansion in the first quarter and manufacturing is already in recession). But more important will be whether the central bank revises down growth in future years, as this will help reveal the extent to which the ECB sees the recent weakness as transitory. No loosening of policy is expected, but rhetoric could well become more dovish.
US payrolls and PMIs
The week ends with the release of the US employment report, key components of which will be non-farm payrolls and wage growth. The risk of a US recession in late 2019 or 2020 are widely seen to have increased, and any disappointments in the labour market data will add to downturn fears. US PMI survey data from IHS Markit and ISM will also add guidance to the health of the economy in the first quarter. Flash PMI data indicated a slowdown in manufacturing as trade wars hit growth, but service sector growth remained encouragingly solid.
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