Every Monday, Mint’s Plain Facts section features five key data releases due in the coming week. The weekly data on foreign exchange reserves will be of interest amid rising crude oil prices. The US is set to update its GDP data for the September-ended quarter. Holiday sales in the country will commence in the upcoming Thanksgiving weekend. Here are the big numbers to track:

 

1. Forex Update

The Reserve Bank of India will release the weekly foreign exchange reserves data on Friday. Even with the covid-19 pandemic hurting economic growth, rise in investment by foreign portfolio investors and higher foreign direct investments have helped the central bank accumulate huge forex reserves. The current account surplus that India saw last year due to the decline in imports and oil prices also helped boost the reserves, providing a cushion against external pressure on the rupee and spill-over impact of impending tightening by the US Fed.

However, the situation has reversed: not only are crude oil prices soaring, imports of other commodities are also rising, which may lead to a wider current account deficit. While foreign investments may offset some impact, the pace of accumulation of foreign exchange reserves is set to slow down in coming months, analysts said. Barclays now sees forex reserves at $650 billion by March as against its previous forecast of $655 billion.

 

 

2. US GDP

When 2021 began, the US was the leader in post-pandemic economic recovery. Business activity surged, pent-up demand lifted high-frequency indicators, and early vaccinations instilled confidence. However, new challenges pricked holes in that story around mid-year. Data released last month showed the economy grew just 2% sequentially in the September quarter, the slowest since the pandemic began. Economists expect that number to be revised slightly upwards in an update due on Wednesday.

The slowdown in July-September was due to a sharp dip in personal consumption and supply-side constraints faced by businesses. However, the early boom meant the US was still the only G7 nation to have surpassed pre-pandemic GDP levels, said a OECD report. Consumption has improved, and will aid growth recovery in the ongoing quarter. However, the challenges haven’t disappeared: multi-decade-high inflation is still choking wallets, and there’s no end in sight to the supply chain struggles.

 

 

3. Thanksgiving Goodies

Retailers and consumers in the US are keenly awaiting the annual Thanksgiving weekend sales. The popular Black Friday offers and discounts are a ritual on the Friday after Thanksgiving, and are widely seen as the start of the holiday shopping season. It is followed by Cyber Monday, which is dominated by online shopping.

Predictions by the US’ National Retail Federation show holiday spending could reach record levels this November and December. The large household savings this year, thanks to the significant fiscal influx from the pandemic aid, put US consumers in an excellent position. Sky-high inflation for months has given them incentive to wait for discounts to make important buys.

The trend for Thanksgiving online sales is gaining popularity in India as well, where online search interest has risen over the years, reaching its highest level in nine years in 2020, Google Trends data shows.

 

 

4. UK & EU PMI

IHS Markit, a market intelligence agency, will release the provisional purchasing managers’ indices (PMI) for November for the UK and the euro area on Tuesday. The business sentiment indicator has been in the expansion zone since early this year, but the momentum is slowing down.  

Both economies, especially their manufacturing sectors, have been plagued by supply-chain issues, high input costs, and lengthy wait times for raw material deliveries. Even though the UK manufacturing PMI was the highest in three months in October, the output index component contracted to its weakest in eight months. For the euro area, the overall manufacturing PMI dropped, too.  

None of the obstacles to production are likely to have gone away in November. A new surge of covid-19 in parts of Europe may only worsen the sentiment. The final PMI data is due in the first week of December.

 

5. China Monetary Policy

The People’s Bank of China will announce its monetary policy decision on Monday. The central bank has kept the benchmark interest rate unchanged for a year and a half to support the economy during the covid-19 pandemic.

Growth picked up earlier this year, but is now slowing down again. The GDP grew 4.9% (year-on-year) in the Jul-Sep quarter, down from 7.9% the previous quarter. Power shortages and the Evergrande liquidity crisis are likely to slow growth down further. However, a big roadblock in China’s way towards a further cut in the interest rate to bolster the economy is soaring factory gate inflation. Even as retail inflation stays low, producer inflation skyrocketed to a 26-year-high in October mainly due to rising coal prices.

Against the backdrop of a stagflation-like situation, China’s central bank may leave interest rates unchanged again and opt for other tools such as cash reserve ratios to support growth.

 

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