World Week Ahead: Jackson Hole beckons at end of US data week
Aug. 27 (BusinessDesk) - The strength of US economic data out this week will shape views on what Federal Reserve
chairman Ben Bernanke say at Jackson Hole, Wyoming, on Aug. 31.
Since the minutes of the last Federal Open Market Committee meeting showed many members would support further monetary
stimulus, the Jackson Hole retreat has loomed large as the next opportunity for Bernanke to say exactly what they were
thinking and when it may happen.
But based on economist estimates, the Fed won’t get much further ammunition to embark of QE3 this week. The S/Case-Shiller index of US house prices probably slowed their rate of decline to 0.3 percent in June from 0.7 percent
while pending home sales, out on Wednesday in the US, probably grew 1 percent in July after shrinking 1.4 percent the
previous month.
Consumer confidence for August slipped to 65.5 on the Conference Board Index from 65.9, a separate report is expected to
show. U.S. consumer spending for July, due out on Thursday, Aug. 30, probably rose 0.5 percent in July, in a resumption
of growth that would be the fastest in five months, based on a Bloomberg survey.
The Dow Jones Industrial Average has been on an upward trend since bottoming out in early June. It finished on Friday in
New York up 0.7 percent. Yet it was still down 0.9 percent last week as investors fretted about Europe’s conviction in
finding a unified solution to the region’s debt crisis.
Greek president Antonis Samaras has asked Germany and France, the biggest economies in Europe, for more time to meet the
terms of financial aid. But after the first meeting, German Chancellor Angela Merkel was vague, saying the answer to the
region’s crisis won’t be resolved by a single action.
Bloomberg reported unnamed European Central Bank officials saying the bank may wait until Germany’s Constitutional Court
rules on its plan to buy bonds of indebted euro nations, scheduled for Sept. 12.
That would push it beyond ECB President Mario Draghi’s Sept. 6 press conference following the Governing Council meeting
of the ECB in Frankfurt and may prevent him offering much comfort to Italy and Spain, whose bonds would be among those
bought.
Yields on 10-year German bunds ended last week at 1.354 percent, the lowest in almost three weeks.
Whether Draghi can telegraph enough of a sense of optimism from the ECB will still be in the realms of speculation this
week, though. In the US, there’s enough economic data to update the health of the world’s biggest economy.
Gross domestic product for the second quarter is expected to be revised to a 1.7 percent pace from 1.5 percent by the
Commerce Department in a report on Wednesday in the US. The Fed releases its beige Book regional economic assessment on
Wednesday.
“Consumers are still participating in the recovery,” Michael Hanson, an economist at Bank of America Corp. in New York
told Bloomberg. “Economic data has been too hot to get the Fed to jump in, but too cold to convince them that we’re
really in a sustainable recovery. The economy is struggling to get back up on its feet.”
That all leaves ‘What will Bernanke say?” as the prevailing question. St. Louis Fed President James Bullard last week
seemed to dismiss the significance of the FOMC minutes as historical. But over the weekend, Chicago Fed President
Charles Evans, a big fan of getting on with QR3, told CNBC in Hong Kong that there is “a lot of reason to do more.”
Both Bullard and Evans are alternate members of the FOMC.
(BusinessDesk)