(Bloomberg) — The world’s two largest economies plan to sign the first phase of a trade deal this week, formalizing an agreement that eased some of the nerves that rippled around the global economy in 2019.
But the U.S.-China deal only reduces some tariffs, and levies left in place mean it’s still in a protectionist world in 2020. There’s no deadline for the next phase of talks, and a failure by either side to abide by the first stage’s commitments may reignite tensions. For the world economy, it’s an easing of headwinds at best that lets growth trundle along in an environment where uncertainty may not fully dissipate.
What Bloomberg’s Economists Say…
“Will the phase one trade deal be substantial or cosmetic? In a sense, it doesn’t matter. For business and market confidence, what matters is the credible signal of de-escalation. If that’s what China and the U.S. deliver on January 15th, optimism on the 2020 trade outlook will be reinforced.”
–Tom Orlik, chief economist
Here’s what happened last week and below is our weekly wrap of what’s going on in the world economy this week.
U.S. and Canada
Trade will be in focus with China’s delegation arriving in Washington to sign the first part of the deal with the U.S. on Wednesday. European Union Trade Commissioner Phil Hogan is also heading to the U.S. for talks with the administration.
On the data front, the latest inflation figures will be released as well as retail sales numbers from the holiday season.
Inflation Trending Near Fed’s Target
Central bankers are coming out of hibernation, with a bounty of speakers due. Eric Rosengren of the Boston Federal Reserve and Raphael Bostic of Atlanta both discuss the economic outlook at events on Monday. Kansas City Fed President Esther George is due up Tuesday, with Patrick Harker of the Philadelphia Fed and Robert Kaplan of the Dallas Fed a day later.
For more, read Bloomberg Economics full Week Ahead for the U.S.
Europe, Middle East and Africa
On Wednesday, Germany’s statistics office will put a number on GDP for 2019, a year that saw the economy slammed by a manufacturing recession. Growth is estimated at 0.5%, which would be the worst performance for Europe’s largest economy since 2013. On Thursday, investors will looking for clues in the account of the European Central Bank’s December policy meeting — the first one chaired by Christine Lagarde.
In the U.K., economic data may take on a little more importance after dovish comments from Bank of England Governor Mark Carney about the need for more stimulus. Monthly GDP arrives Monday, followed by inflation on Wednesday, and retail sales close out the week on Friday.
U.K. Inflation to Remain Below Target
The South African, Turkish and Egyptian central banks will announce their first interest-rates decision of 2020 on Thursday.
South Africa will probably keep its key rate unchanged, even with inflation at a nine-year low, because continued government-policy uncertainty and the deterioration in the public finances increase risks. Turkey is also expected to hold as creeping inflation leaves little room for further cuts. Prices are rising in Egypt, giving policy makers the option of pausing this month, although analysts say they expect the easing cycle to continue through this year.
For more, read Bloomberg Economics’ full Week Ahead for EMEA
Asia
The phase one deal will be the backdrop data on China’s full-year GDP numbers. They will be published Friday, and are expected to show the economy steadied at an expansion pace of about 6% in the fourth quarter.
China Forecast Table
Bank of Japan Governor Haruhiko Kuroda speaks on Wednesday, and South Korea’s central bank will have its first policy meeting of the year on Friday, with no change anticipated.
For more, read Bloomberg Economics’ full Week Ahead for Asia
Latin America
Investors will get a better read on whether or not growth is accelerating in Latin America’s largest economy. Brazil retail sales figures due on Wednesday will likely show the seventh straight monthly gain, with results driven by Black Friday promotions and record low interest rates.
The country’s central bank will also publish its economic activity index — a closely watched GDP proxy — for November.
For more, read Bloomberg Economics’ full Week Ahead for Latin America
