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 Federal Reserve will start unwinding its exceptional monetary stimulus.
Updated gross domestic product figures are usually brushed aside as backward-looking.
But with the timetable for Fed ‘tapering' dependent on the flow of data, any upward revision to U.S. second-quarter GDP growth can only strengthen the hand of those who expect the central bank to move as early as its September 17/18 policy meeting.
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 U.S. economy is far from firing on all cylinders. But last week 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 in Charlotte, North Carolina, said he still thought, after the minutes of July's policy-making Federal Open Market Committee (FOMC), 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 FOMC 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.
HEADWINDS AND TAILWINDS
To be sure, the Fed has to take account of plenty of headwinds.
Bullard cited the risk of a U.S. government shutdown due to wrangling over next year's budget. Congress also needs to raise the federal debt ceiling by November, raising the specter of a repeat of the brinkmanship that rocked markets two years ago.
"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," Bullard said. "It's not a slam dunk."
Figures this week are also likely to show U.S. inflation according to the Fed's preferred measure, the core deflator for personal consumption expenditure, remained stuck last month near June's uncomfortably low annual rate of 1.2 percent.
And financial conditions have tightened since the Fed met in July, with mortgage rates yanked higher by rising bond yields.
But Jerry Webman, 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, say $75 billion a month instead of $85 billion.
"At the moment, expect tapering to begin in the middle of September; don't expect it to be terribly disruptive to financial markets," New York-based Webman said.
JAPAN AND GERMANY LOOKING UP
Statistics this week from developed economies should partly allay another concern voiced in the Fed minutes - that America's export markets were sluggish.
Japan, responding to aggressive monetary stimulus and a weaker yen, is forecast to report a rebound in industrial output and household spending alongside an acceleration in consumer price inflation - just as the Bank of Japan wishes.
In Germany, economists are penciling in a rise in the IFO business climate index for August to 107.0 from 106.2 as well as a solid rise in retail sales and a dip in the number of jobless.
After data on Friday showed Germany's 0.7 percent rise in second-quarter GDP was driven by domestic demand, including a rebound in business spending, Thomas Harjes with Barclays in Frankfurt said he expected Europe's largest economy to maintain its underlying 2 percent annualized growth rate through 2014.
"Corporate capital investment should continue a moderate recovery unless the euro area crisis intensifies again, or global demand, especially from China, is significantly weaker than expected," Harjes said in a note.
The data flow from China has in fact 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 due to growth worries and a looming end to ever more cheap dollars printed by the Fed - opening up a negative feedback loop for Bernanke to bear in mind.
Derry Pickford, a macro analyst with Ashburton in London, said investors might be underestimating the potential impact of emerging-market woes on U.S. and European profitability.
"The fact that country-specific emerging market shocks have coincided with tapering talk has created a bit of a perfect storm for emerging markets," he said.
(Editing by Hugh Lawson)