China PMI, US housing Market and FOMC delusion Next week

Week ahead economic calendar [19 - 23 Sept] 
Central bank policymaking under the spotlight
ƒ FOMC and MPC updates to be watched for signs
of further stimulus
ƒ Flash PMIs for China and Eurozone to provide
first insight into September growth trends
The highlights of the week are updates on US and UK central 
bank policymaking and flash PMI surveys for China and 
Eurozone.
The US Federal Open Market Committee (FOMC) decision
on Wednesday will be watched for the possibility of additional
stimulus. Options may include buying more government
bonds, switching from shorter-term to longer-term bonds to
help reduce mortgage and other long-term debt interest
rates, or cutting the 0.25% interest rate it pays on the $1.7
trillion of excess reserves that banks hold at the Fed, as this
should stimulate bank lending.  However, there is a concern
that banks, already under financial strain, could be hurt
further by any reduction in mortgage lending margins or any
lowering of the excess reserve interest rate. Furthermore,
with Bernanke still expecting the recovery to regain
momentum later this year, there is a distinct possibility that
the Fed will do nothing.
The Bank of England elected to do nothing at its September
Monetary Policy Committee (MPC) meeting, but the minutes
from the meeting are likely to  indicate that the MPC grew
increasingly worried about the fragility of the economic
recovery following a raft of weak data. Both Spencer Dale
and Martin Weale have moved away from their hawkish
stances, and others may have joined Adam Posen in voting
for additional stimulus.
The first indicators of the health of the global economy in 
September will be provided by flash PMI data for China and 
the Eurozone. PMIs showed manufacturing roughly
stagnating in both China and the Eurozone in August, down
sharply since the start of the year, while growth of services
slipped closer to stagnation in the Eurozone. Perhaps of
greatest interest will be whether growth in Germany – the
Eurozone’s main growth driver in the early stages of the
recovery – continues to disappoint as the financial crisis hits
confidence. A steep slide in business confidence in the
European banking sector (see chart) suggests that further
weakness in the wider economy lies ahead.

The UK Household Finance Index (HFI), compiled by Markit,
will provide the first insight into consumer spending, savings
and debt trends in September, as well as inflation
expectations, house prices and job security. Households
reported the sharpest deterioration in their finances since the
survey began last month, exceeding even that seen during
the worst point of the recession.
A snapshot of the US housing market will be provided by the
National Association of Home Builders (NAHB) index, which
remained at a very depressed level in August.    
Tuesday
German producer prices data will highlight supply chain price 
pressures. Rates of increase accelerated, both in annual and
monthly terms in July. Next up for Germany is the ZEW
survey. A slump in investor confidence was seen last month.
Elsewhere in the single currency area, Italian industrial
orders and sales numbers are published.
US housing starts will be watched as a guide to the health of 
the housing market and construction industry. Meanwhile,
weekly Redbook and ICSC store chain sales will give a
handle on consumer spending patterns.
Central bank committees in both Hungary and Turkey meet
to determine monetary policy.
Wednesday
Japan publishes its monthly trade report early Wednesday
morning. Markit’s PMI™ manufacturing survey showed new
export business falling for the sixth successive month in Markit Economic Research
August, with respondents attributing this to ongoing yen
strength and subdued demand from China.  
What PMI panellists in Japan linked the fall in exports to..
Source: Markit. Size of words linked to number of times cited by companies.
The minutes from the Bank  of England’s Monetary Policy 
Committee (MPC) August meeting will be eagerly awaited for 
signs that the MPC moved closer to voting for another round
of asset purchases. Public sector borrowing numbers will
highlight whether the government is on track to meet its
deficit reduction target. The government will want a repeat of
the big fall in public sector borrowing recorded in July, but
weaker-than-expected economic growth points to a growing
risk that the target will be missed.
In the US, weekly MBA mortgage applications are released
ahead of existing home sales numbers and the Federal Open 
Market Committee (FOMC) interest rate announcement. 
Despite the clamour for looser policy, the Fed is unlikely to 
announce a third round of asset purchases, known as QE3, 
next week. The Czech National Bank also meets to discuss
monetary policy.  
Thursday
Markit and HSBC publish the Flash China Manufacturing
PMI™ early Thursday morning. Analysts will watch these
numbers closely after business conditions deteriorated for a
second successive month in August.

   All eyes will then be on the publication of the flash PMI™
surveys for France, Germany and the euro currency area as
a whole. August’s Eurozone PMI survey pointed to the
slowest rate of economic growth for two years, as the
region’s recovery almost ground to a halt. The risk of the
Eurozone slipping back into contraction has therefore risen.
September data will round off the Q3 picture. Additionally,
industrial orders and consumer confidence numbers for the
Eurozone are published, while the Confederation of British
Industry (CBI) releases industrial trends data for the UK.
In the US, weekly jobless claims (both initial and continued)
and the Federal Housing Finance Agency (FHFA) house
price index are published.  
Friday 
The week ends on a relatively quiet note, with the publication
of French consumer confidence and business climate data in
advance of Italian trade and retail sales numbers.

NOTE : 1) FOMC is unlikely to make announcement and is likely to
disappoint market. 2) Expect advance declaration by some companies.