By Jeremy Gaunt
LONDON, March 2 Take your pick of the most
important economic event of the coming week - forward-looking
global activity data, interest rate decisions in Europe or a
spot-check on U.S. jobs after a month of particularly bad
Given that the payrolls data - usually the premier data
event at the start of any month - is likely to be skewed by
blizzards, best start with the global picture.
Purchasing manager surveys, known as PMIs, will show the
intentions of manufacturing and services businesses across the
world as the surveys are released over the first few days of the
They will be eyed for signs of further slowing in China,
indications as to whether Europe's growth gathering any
momentum, and for confirmation that the U.S economy is on its
way up although by no means there yet.
The Chinese manufacturing figure is expected to dip slightly
and show barely any growth - a worry for already battered
emerging markets as well as a drag globally. Preliminary figures
from the euro zone have already pointed to only modest growth.
What is expected from the United States depends on the
survey, but the overall picture is expected to be relatively
steady with any glitch blamed on the weather.
This would fit both with Friday's downward revision of
fourth quarter growth and with the testimony to Congress of
Janet Yellen, who chairs the U.S. Federal Reserve.
Barclays economists paraphrased the latter as: "While the
economy has strengthened and the outlook for the economy in the
coming years has improved ... the economy is several years or
more away from operating normally."
Much the same is expected from the snow-blown jobs data -
non-farm payrolls - on Friday. Reuters polling suggests 160,000
new jobs were created in February, up from 113,000 in January.
But there is scope for disappointment.
"Non-farm payrolls (are) likely remain subdued," economists
at ING said in a note. "Nonetheless, we believe that the
underlying story is good with recruitment firms suggesting that
businesses are looking to hire, but the weather has made
scheduling interviews difficult."
TO MOVE OR NOT TO MOVE
Europe's outlook will be dominated by the monthly meeting of
the European Central Bank on Thursday and its accompanying news
conference by President Mario Draghi.
The ECB is struggling to balance fragile growth and very low
inflation with various strictures on what it can do, all wrapped
up with a commercial banking system that is reluctant to lend.
A Reuters poll last week showed a majority of
economists do not expect to bank to cut rates from its current
0.25 percent level. But a growing number - 26 of 78 - think they
will do so on Thursday, by 5 to 15 basis points.
That was the strongest view for an easing in policy in
Reuters polls since November last year when the ECB surprised
markets by cutting the benchmark rate by 25 basis points.
So the policy decision looks like a close call, particularly
since Draghi talked at his last post-meeting news conference
about getting more information before deciding whether to take
fresh policy action.
Since then, gross domestic product growth has come in
slightly stronger than expected. Also inflation - another worry
- has not weakened further. The latest reading of 0.8 percent
year on year was unchanged from the prior month.
The ECB staff will be giving their updated economic outlooks
to add grist to Draghi's mill. The ECB says it is not worried
about deflation - the actual falling of prices - but that is
before the new forecasts.
Even if the bank doesn't cut on Thursday it may take other
actions. One is to suspend its practice of soaking up the money
it spent buying sovereign bonds.
This would stop short of the large-scale money-printing
quantitative easing that Germany opposes.
ACTIVELY NOT DOING ANYTHING
Europe's other major central bank - the Bank of England -
also meets on rates in the coming week.
It is a runaway bet that it will do nothing. Policymakers
have stressed with remarkable unity that they are in no hurry to
raise rates and, for the time being, there is no economic
pressure for a hike.
But longer term, the central bank's stance - rates at just
0.5 percent - is not in keeping with Britain's improving
As Rob Wood, chief UK economist for Berenberg Bank, puts it:
"If we started from a blank sheet of paper, it seems unlikely
that the sensible decision would be to set interest rates at a
record low in an economy growing at trend, with high and rising
recruitment difficulties, and unemployment less than 1
percentage point above (equilibrium) and falling fast."
What is eventually likely to prompt a change is a sign that
wages are starting to pick up.