Week ahead (3-7 March)

WEEK IN REVIEW

The European Commission revised euro-area growth forecasts  by one tenth p.p. to 1.2% in 2014 and 1.8% in 2015, thanks to expectations of a rise in global trade and of a stronger recovery in the US and some emerging countries. In the EU, the EC takes note of the re-balancing of growth with the recovery in domestic demand, an improvement in the external position in some countries and easier financial conditions. On the downside, the EC is concerned that growth may remain weak for a protracted period, particularly  should economic reform lag behind, or should financing conditions be affected by lower than expected inflation or weak credit growth.

In the US, Q4 GDP data was revised down to 2.4%qoq annualised, down from 3.25 previously on the back of lower than initially estimated consumption growth. Some of this weakness may be related to extreme whether conditions. but should it persist, it could persuade the Federal Reserve to slow down the pace of tapering.

In the Portuguese-speaking world, the IMF and European Commission reports on the 10th review of the Portuguese Economic and Financial Support programme, highlighted the main risks to long term debt sustainability and growth in Portugal. In particular, both recommended further efforts to reduce excessive rents in some industries and further cuts in private sector wages.

In Angola, public investment accelerated sharply in Q3 2013 adding up to the same amount as the whole of the first semester. The slow start of public investment was an important factor leading to the revision of GDP growth, but was justified by the late approval of the 2013 Budget, partly due to elections.

WEEK AHEAD

3 March:

  • US February ISM report: this well respected confidence indicator was 51.3 in February, above the zero-growth threshold of 50 but not by much. Should it rise from here it could mean that the recent bout of weakness was a temporary blip, but a decline could weaken the Fed’s tapering pacing.

6 March:

  • ECB rate setting meeting: markets expect rates to remain unchanged as the recovery takes hold, albeit slowly, and February inflation in the euro are remained unchanged at 0.8%, still low but better than expected. These news should justify a wait-and-see attitude from the ECB.

7 March

  • US Non-farm payroll (employment): markets expect a 150 thousand rise after a weakish 113 thousand rise int he previous month