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Second winter of suffering threatens the global economy: Eco week ahead

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Craig Stirling

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The global economy is  -proaching Northern Hemisphere winter in disarray and unable to shake off the coronavirus crisis amid ongoing supply disruptions, rising prices, and renewed outbreaks.

Global polls of purchasing managers this week should point in that direction. Outcomes expected by economists include a slowdown in manufacturing and service activity across the euro area and the UK, and little improvement in the US

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As parts of Europe face renewed restrictions to contain another wave of the virus, China’s recovery slows and infections spread to America, much of the global economy is now staring at the risk of a second northern winter of suffering, compounded by costs Life emergency amid rising gas prices and delivery bottlenecks.

Europe is at the sharper end of the wedge of the advanced world. Record infections in Germany could lead authorities to announce new bans, and Austria has already done just that. The continent as a whole is experiencing a painful peak in consumer prices.

In the US, meanwhile, former US Treasury Secretary Lawrence Summers sees no more than a 15% chance that “everything will go well,” with the likelihood of persistently high inflation or a slump in growth being much greater.

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The extent to which such outcomes play out will affect monetary policy considerations about the speed at which incentives will be withdrawn in the Group of Seven, which culminate in a grand finale of decisions in mid-December. Then the central banks, including the US Federal Reserve, hold their final meetings of the year.

What Bloomberg Economics says:

“Much of Europe is pulling back in the face of a fourth wave of Covid-19, and survey data next week should provide initial indications of the economic impact of rising infection rates.”

–For a full analysis, click here

Elsewhere this week, currency officials in New Zealand and South Korea could raise interest rates, and minutes of recent meetings of the Fed and the European Central Bank will be released.

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Click here to see what h -pened last week and below is our round-up of developments in the world economy.

US

A pre-holiday feast of economic data and a possible announcement of President Joe Biden’s election to lead the Federal Reserve will be made available to investors next week.

The government’s personal income and spending report, which includes a Fed-tracked inflation measurement, will be the main course on data-heavy Wednesday before markets close for Thanksgiving the next day.

Other releases on Wednesday include orders for durable goods, revised third quarter economic growth, new home sales, merchandise trading and one final assessment of consumer sentiment. Existing data on home buying and manufacturing and services surveys for November will emerge earlier this week.

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Also on Wednesday, the Fed will publish minutes of its monetary policy meeting in early November, in which the US Federal Reserve announced that it would reduce bond purchases.

Meanwhile, the White House says Biden will announce whether he will nominate Jerome Powell for a second term as chairman of the central bank or choose Fed Governor Lael Brainard instead.

For more information, see Bloomberg Economics’ full US week

Asia

The Reserve Bank of New Zealand and the Bank of Korea are both expected to hike rates for the second time since the pandemic as they lead the top tier in Asia and take action to step back from full throttle incentives and join the curve Stay one step ahead of containing any inflation risks.

Preliminary South Korean trade numbers should suggest a hike, even if they show signs of stabilizing from outstanding year-over-year gains.

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Reserve Bank of Australia officials will speak on panels and may shed some light on how much the central bank will hold on to its stance on the rate hike package.

The Tokyo inflation numbers at the end of the week will show whether J -an sees more signs of price hike given rising energy costs. China sets the key lending rate on Monday and Sri Lanka sets the interest rate on Thursday.

For more information, see Bloomberg Economics’ full week for Asia

Europe, Middle East, Africa

With more than two weeks left for ECB officials to dwell before their all-important decision on the future of stimulus measures, comments from several of them could c -tivate investors. President Christine Lagarde will speak among the policy makers.

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The ECB will also release a report on its last meeting in October, when Lagarde and colleagues struggled to convince financial markets that betting on a rate hike in 2022 to curb inflation was likely out of place.

 -art from the monthly results of the purchasing manager survey across the continent, the German Ifo index will provide another sn -shot of Europe’s largest economy on Wednesday – just as it is characterized by ongoing supply disruptions, new infections and a political system in the midst of ongoing coalition negotiations.

The Bank of England’s decision in December looks tense over whether policymakers will hike rates. Public statements by Governor Andrew Bailey and a few colleagues in the coming week may therefore attract attention.

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Over the weekend, Bailey told the Sunday Times that Britain’s economic activity would slow despite rising prices, underscoring the “two-way” debate on inflation.

The Swedish central bank will make its last monetary policy decision of the year on Thursday. Since the Riksbank is likely to keep its interest rate unchanged at zero for some time, the focus should be on whether it signals an interest rate hike by the end of 2024.

Further afield, Israel is expected to keep borrowing costs on hold on Monday due to strong growth and slowing inflation, largely driven by the shekel.

In Russia, weekly inflation will be closely monitored on Wednesday for clues as to whether price pressures are easing, as many economists predict.

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Ghana policymakers are expected to keep rates unchanged on Monday after inflation accelerated to a 15-month high in October. The Nigerian central bank is also expected to fall by the wayside on Tuesday as inflation eases and economic growth slowed in the third quarter.

For more information, see the full Bloomberg Economics week for the EMEA region

Latin America

Argentina’s budget balance data, expected on Monday, should underscore the challenge of getting its debt back on track for sustainability. Falling case numbers in Mexico have spurred a rebound in sales in the same store, a likely harbinger of stronger retail sales in September on Tuesday.

Economic activity in Argentina has surprised analysts positively since the middle of the year and has returned to pre-pandemic levels. Analysts see additional growth in the September figures.

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Keep an eye out for mid-month Brazilian consumer price data released on Thursday to rise from 10.34% pressure in mid-October. After a sustained increase since May 2020, however, a certain slowdown is to be expected: Economists surveyed by the central bank see inflation at 9.77% at the end of the year, while the central bank puts it at 9.5%.

In Mexico, final production data is expected for the third quarter, with all signs continuing to point to a solid rebound in 2021. Economists see inflation spike mid-month, in line with Banxico’s Deputy Governor Jonathan Heath’s estimate that it could hit 7.3% by the end of the year.

Finally, Banxico publishes the minutes of its November 11 meeting, in which the key rate was raised for the fourth time in a row by a quarter point to 5%.

For more information, see Bloomberg Economics’ full Latin America Week

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