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 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 week.
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 <ECB/INT> 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.
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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 economic
climate.
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.
(Additional reporting by Paul Carrel and
William Schomberg; editing by Ruth Pitchford)
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