London: The world economy has begun the year in fine form. America is cruising along, China is growing faster than expected, Britain is muffling the Brexit downdraft. Even the usually lagging Eurozone is perky.
This coming week will likely indicate how long this is going to continue.
The week will likely be dominated by China, which returns from a holiday with a large slate of data, including the services purchasing managers index, foreign reserves data and possibly trade figures.
China grew a faster-than-expected 6.8 per cent in the fourth quarter, boosted by higher government spending and record bank lending.
But the economy still faces headwinds from a cooling housing market and possible protectionist measures from the US.
The foreign exchange reserves, meanwhile, are on the verge of falling below $3 trillion, although the pace of declines could be slowed by capital controls and the dollar’s retreat.
China is being cautious. It raised a number of policy rates on Friday against what Deutsche Bank described as a dilemma.
“Policy needs to be tightened for financial stability considerations, but (the central bank) wants to control the pace and magnitude so that ... the tightening does not trigger disruptive adjustments (bubble burst), and ... does not jeopardise the stabilising growth outlook,” it said.
In the Eurozone, there will be German, French, Spanish and Italian industrial production data. All are expected to show growth.
Germany’s volatile factory orders may be under particular scrutiny. They fell 2.5 per cent month-on-month in November, a plunge from a 5 per cent rise the month before.
Economists polled by Reuters expect a bounce back.
Meanwhile, a wish-you-were-a-fly-on-the wall moment occurs on Thursday when European Central Bank President Mario Draghi goes to Berlin for talks on the Eurozone economy with German Chancellor Angela Merkel.
For the US, the weekly outlook is thin, with monthly trade figures a highlight with a little changed $45 billion deficit expected. Any significant policy moves, however, are likely to be found on Twitter feed @realDonaldTrump.
