World Week Ahead: U.S. Economy Needs Winter to End

WRAP: A flurry of Federal Reserve speaking engagements mid-week should help shed light on where the consensus lies within the Fed on when and how aggressively to start raising rates. We also end out the week with the latest labor market report, which will function as another guide on the outlook for rates. The U.S. economy has of late been exhibiting signs of a slowdown, seemingly due to excessively cold weather, but the jobs reports have stood as an exception to that. Whether the winter slowdown shows up in payrolls growth will to some extent indicate how strong the underlying recovery is and whether it can pick up steam again as we move into the spring. The rest of the world needs that U.S. recovery to continue -- and this week we'll get reminders of the risks that continue to play out in other parts of the world: the Greek crisis in the eurozone, the economic slowdown in China.

MONDAY

CHINA/U.S.: Time N/A. U.S. Treasury Secretary Jacob Lew meets senior Chinese officials in Beijing.

Oh, to be a fly on the wall at these meetings. There is much for the financial authorities of the world's two biggest economies to discuss. A sampling: The rising U.S. dollar, to which the yuan is loosely pegged, and the question of whether China might be tempted to respond by weakening its currency against the rest of the world; Beijing's plans for the Asian Infrastructure Investment Bank and Washington's concerns that that project might undermine the influence of the World Bank and Asian Development Bank; the ongoing concerns about restrictive treatment of foreign investors in China.

GERMANY: 8 a.m. (2 p.m, Berlin) March provisional consumer prices index. [EU-harmonized CPI expected +0.5% on-month vs. +1.0% in February, expected +0.1% on-year vs. -0.1% in February.]

A bounce in prices facilitated by a something of a stabilization in oil markets is helping to lift German inflation out of negative territory, but the European Central Bank will need to see a sustained gain, in Germany and across the wider eurozone, to ease its foot off the stimulus pedal.

U.S.: 8:30 a.m EDT. February personal income and outlays. [Personal income expected +0.3% on-month vs. +0.3% in January; personal spending expected +0.2% vs. -0.2%.]

If consumer spending is pulling back, it's at least an encouraging sign that incomes are outpacing it. That could result in an unleashing of deferred spending in the second quarter when the weather warms up.

U.S.: 10 a.m. EDT. National Association of Realtors February pending home sales index. [Rose by 1.7% in January.]

Last month's result, which took this leading indicator to its highest level in a year and a half was a welcome sign that activity in the housing sector is poised to pick up -- also perhaps once the cold weather disappears.

SOUTH KOREA: 7 p.m. EDT. (8 a.m. Friday, Seoul). February industrial production Index. [Previous month -3.7% on-month, +1.8% on-year]

There had been some hopeful signs of a recovery in the South Korean economy at the end of the last year, but then this very poor reading of the country's key industrial sector came out. (Expectations last month had been for a gain of around 1.2%.) Was that an anomaly or was it a sign or another leg down for an economy that's been hobbled somewhat by a slowdown in neighboring China?

U.K.: 7:05 p.m. EDT. (12:05 a.m. Friday, London). GfK March consumer confidence survey. [Index: 1 in December.]

At least this indicator is back in positive territory. But the British consumer doesn't seem to be as ebullient as he or she was a year ago.

GREECE: Time N/A. The government is expected to present a package of policy changes to the Eurogroup of eurozone finance ministers.

The Greek government headed by the left-wing Syriza party must deliver a concrete plan of action to bring in an additional $3 billion in revenue and produce a 1.5% primary surplus in the current year if it is to continue to receive financial aid from its eurozone creditors. But after a visit to Germany by new Prime Minister Alex Tsipras failed to deliver strong assurances of his government's commitment to the plan last year, hopes are not running high. A failure to meet the deadline or to deliver a package that is deemed sufficiently workable could revive nervousness over the prospect of a complete break with creditors, an end to European Central Bank support for Greece's struggling banks and -- in a worst case scenario -- a Greek exit from the eurozone.

U.S.: Time N/A. Federal Reserve Vice Chairman Stanley Fischer speaks at dinner preceding the Atlanta Fed's Annual Financial Markets Conference in Stone Mountain, GA.

Last week, we heard diametrically opposed views on the timing of the first rate hike from the Chicago Fed President Charles Evans (who thinks "lift off" shouldn't begin until 2016) and St. Louis Fed President James Bullard (who thinks the deed should be done as early as June.) Where does Mr. Fischer, a man with significant influence on the board, sit between these? He'll probably be diplomatic and equivocate, but investors will be looking for clues on his position. Given that it's a financial markets conference, it will also be important to see if he weighs in on the mounting concerns about illiquidity in world bond markets and the risks that poses in an environment of rising U.S. rates. This is the first of a string of Fed speeches at the Stone Mountain event and elsewhere this week. Together they will, hopefully, paint a clearer picture of the Fed's intentions as a group.

TUESDAY

GERMANY: 4 a.m EDT. (10 a.m., Berlin). March labor market statistics. [Adjusted unemployment expected 6.5% , unchanged from February.]#

German labor conditions aren't as tight as in the U.S. but Germany's unemployment rate must be the envy of places like Spain, where joblessness is well above 20% -- or even Italy (12.6%), which reports its unemployment result at the same time. It's another sign that the German economy remains strong and, from a political standpoint, that it's in a position to make adjustments that could boost its consumption rate and lower a ballooning trade surplus that continues to harm its underperforming neighbor's export opportunities.

EUROZONE: 5 a.m. EDT. (11 a.m, Brussels)

--February unemployment. [Expected 11.2%, unchanged from January.]

The data are a month older than Germany's, but they will no doubt serve to emphasize the stark differences across the euro zone.

--March flash estimate euro area inflation. [Expected harmonized CPI -0.1% on-year vs. -0.3% in February; core CPI expected +0.7%, unchanged from January.]

Falling oil prices are the main cause of soft headline CPI numbers in the eurozone, but the broader concern is that even the core consumer price estimate, which strips out volatile food and energy prices, is in a disinflationary state. Numbers continuing like this will keep the ECB's foot on the quantitative easing pedal.

U.S.: 9 a.m. EDT. January S&P / Case-Shiller Home Price Index. [20-city Index was +0.1% in December, +4.5% on-year.]

The cold weather of winter slowed down construction and homes sales. Did it also impact prices?

U.S.: 10 a.m. EDT. The Conference Board March consumer confidence index. [Index expected 96.8 vs. 96.4 in February.]

Although there have been some clear signs that the cold winter crimped U.S. economic activity, consumers have continued to feel pretty upbeat.

U.S.:

--12 p.m. EDT. Federal Reserve Bank of Richmond President Jeffrey Lacker speaks on the economic outlook before the Greater Richmond Chamber of Commerce Spring Regional Forum.

--2:15 pm. EDT Federal Reserve Bank of Cleveland President Loretta Mester speaks at the Atlanta Fed's annual conference in Stone Mountain.

Mr. Lacker is a voting member and most likely occupying the most hawkish position in a Federal Open Market Committee that has turned somewhat dovish with this year's voting roster. Ms. Mester is also thought to have a hawkish inclination to favor nearer term rate hikes, though not as clearly as Mr. Lacker. She does not vote on the FOMC this year.

JAPAN: 7:50 p.m. EDT. (8:50 a.m., Tokyo, Wednesday). Bank of Japan first quarter Tankan Survey of Enterprises in Japan. [Large manufacturers' diffusion index was 12 in prior quarter.]

Improvements in manufacturing activity and in exports are expected to have boosted the mood of Japanese businesses last quarter, but without any pickup in domestic demand that might not last.

SOUTH KOREA: 8 p.m. EDT. (9 a.m. Wednesday, Seoul).

--March trade data. [Trade surplus in October was $7.7 billion, with exports down 3.4% from a year earlier.] --March HSBC South Korea Manufacturing purchasing managers' index. [In October, PMI was 51.1.]

South Korea has shown a modest recovery over the past two months, and both export orders and manufacturing activity have been part of that. But it's a fragile recovery at best. Confirmation is required.

CHINA:

--9 p.m. EDT. (9 a.m Wednesday, Beijing). China Federation of Logistics and Purchasing March Purchasing Managers Indexes. [CFLP China manufacturing PMI was 49.91 in February, non-manufacturing PMI was 53.9.]

--9:45 p.m. EDT. (9:45 a.m., Wednesday). Markit Economics/HSBC end-March manufacturing PMI [Index was 49.2 mid-March, down from 50.7 end-February.]

China's is the economy that's arguably provoking the most worry right now. It's still mostly growing faster than anywhere else,, but the extent of the slowdown in the world's second-largest economy seems to be consistently exceeding expectations. The mid-month PMI from HSBC, which covers mostly medium-sized private companies, offered an important reason for that interpretation. Now, we have a chance to see how the larger, state-owned sector is doing.#

WEDNESDAY

INDONESIA: 12 a.m. EDT (11 a.m, Jakarta). March consumer price index. [In February, CPI was +6.29% on-year, -0.36% on-month; core CPI was +4.96% on-year.]

The softening state of Indonesian inflation is giving Indonesia's central bank some breathing room so that it hasn't been compelled to step in and prop up a weakening rupiah.

EUROZONE: 3 a.m. -4 a.m. EST. (9 a.m-10 a.m, Brussels) February manufacturing PMIs

--NETHERLANDS: [In February, index was 52.2, down from 54.1 in January.] --SPAIN: [In February, index was 54.2, down from 54.7 in January.] --ITALY: [Expected 52.0 vs. 51.9in February.] --FRANCE: [Expected 48.2, unchanged from mid-March, up from 47.6 in February.] --GERMANY: [Expected 52.4, unchanged from mid-March, up from 51.1 in February.] --EUROZONE: [Expected 51.9, unchanged from March, up from 51.0 in February.]

The mid-March "flash" indicators suggested that eurozone growth enjoyed a modest acceleration in March, dragged along by a more rapid expansion in Germany. But there are still weak spots, not least France -- the eurozone's second-biggest economy -- whose factory sector remains in sub-50 contraction mode.

U.K.: 4:30 a.m. EDT. (9:30 a.m, London) Chartered Institute of Purchasing & Supply March Markit Manufacturing PMI. [In February, PMI was 54.1.]

Even though British retail and housing demand is slowing, there's still fairly healthy growth in the manufacturing sector. That's the kind of thing that could ensure that the Bank of England looks to follow the Federal Reserve in hiking rates later this year.

BRAZIL: 8 a.m. EDT. (9 a.m., Sao Paulo). February industrial production. [In January, industrial output rose 2% on-month, was down 5.2% on-year.]

Last month's gain was a welcome turnabout for this indicator, which for much of the past couple of years has captured the extent of Brazil's economic malaise. Was that rebound a blip or the start of a long overdue recovery?

U.S.: 8:15 a.m. Automatic Data Processing Inc. March ADP National Employment Report. [Expected private payrolls increase 225,000 vs. +212000 in February.]

The cold winter has been harsh on production in the populous north, but it hasn't yet showed up in labor results. Will we now finally see it in the ADP numbers -- which are looked to as a (rather imperfect) harbinger of the government's payroll report, due on Friday?

U.S.: 10 a.m. EDT.

--Institute for Supply Management March manufacturing report on business. [Manufacturing PMI expected 53.8 vs. 52.9 in February.]

The same question hangs over the ISM manufacturing report as it does for other pieces of March data: How much of an effect has the harsh winter had on economic activity?

--February construction spending. [Expected unchanged on-month vs. -1.1% in January.]

And the construction sector is arguably the sector of the economy that is most held by cold weather.

U.S.: 12:30 p.m. EDT. John Williams and Dennis Lockhart speak at the Atlanta Fed's Stone Mountain Annual Financial Markets Conference.

This pair might be looked upon as centrists, and both are voters in this year's FOMC rotation. That makes them important bellwethers of where the Fed's consensus lies on the timing of the first rate hike. That's not to say they'll oblige us with a clear message, of course.

U.S.: 4 p.m. EST. March domestic auto industry sales. [Expected 16.8million units (annualized rate) vs. 16.23 million in February.]

Auto sales have been one of those measures that defied the cold. The expectation is for even more of that in March.

THURSDAY

INDIA: 1 a.m. EDT. (10:30 a.m., New Delhi). Markit Economics March India Manufacturing PMI. [In February the PMI was 51.2.]#

India's manufacturing PMI dropped to a five-month low in February, yet foreign investment has been growing in the country, partly because of a positive assessment of the new Prime Minister Narendra Modi's promises (far from fulfilled) to overhaul the economy and make it more friendly to business. Will that inflow start translating into faster economic activity or is India's economy going to again fail to live up to its potential?

WORLD: Many countries with predominantly Christian populations close their markets for Holy Thursday. U.S.: 8:30 a.m. EDT. Federal Reserve Chairwoman Janet Yellen speech at Community Development Research Conference.

Not a forum in which the Fed chair is likely to offer much new insight into monetary policy -- not after she already weighed in the topic of interest rate hikes on Friday (saying that one remains possible this year.)

CANADA: 8:30 a.m. EDT. February international merchandise trade. [in January, exports were down -2.8% on-year, imports were unchanged and the trade deficit stood at $2.45 billion.]

Canada needs to see a pickup in demand for its goods from the U.S. Perhaps the colder winter is also hurting Chinese exporters.

U.S.: 8:30 a.m. EDT.

--February international trade in goods and services. [Deficit expected $40.8 billion, down from $41.8 billion.]

Oil prices are still playing havoc with the trade data, on both sides of the equation. Last month, the fall in crude prices contributed to a 3.9% decline in the value of imports and a 2.9% drop in the value of exports (via a decline in the value of refined products.). We'll have to see how these data perform once oil markets settle down to get a clearer picture of the U.S. relationship with the rest of the world, where oil prices are also dramatically changing such numbers.

--Unemployment insurance weekly claims Report. Expected initial weekly jobless claims 285,000 vs. 282,000.

One clear sign that the cold weather-induced slowdown in various sectors of the economy won't last is the fact that businesses aren't laying off. Jobless claims are back at exceedingly low levels, indicating a tight labor market.

CHINA: 9:45 p.m. EDT. (9:45 a.m.) Markit Economics March services PMI. [In February, the PMI was 52,up from 51.8 in January.]

It's the service sector that's keeping China growing at a decent pace right now, with much of the slowdown happening in manufacturing and construction. But although the PMI rose slightly in February and remains above the 50 expansion threshold, services aren't growing especially rapidly either.

FRIDAY

TURKEY: 3 a.m. EDT. (10 a.m., Ankara) Turkey March consumer price. [In February +0.71% on-month, +7.55% on -year]

Inflation is Turkey's bugaboo, the legacy of the central bank's inability to assert its independence (despite its best efforts to stand up to Prime Minister Recep Tayyip Erdogan.)

U.S.: 8:30 a.m. EDT. March employment report. [Non-farm payrolls expected 247,000 vs. 295,000 in February; unemployment 5.5%, unchanged from February; average hourly wages +0.2% vs. +0.1%.]

Economists are looking for the cold snap of the past winter to have finally taken a modest bite out of what has been a strong pattern of jobs growth. If that doesn't happen it will reinforce how strong the labor market is becoming and could even raise the odds of a near-term Fed rate hike; if it does, it will likely be dismissed as weather-related anomaly. The thing to watch in all of this is wages. Until now, there has been very little sign that tighter labor market conditions is feeding into higher employee payments.