Olympics kick off. BoE sets rates. US election shifts into high gear. Muslim leaders meet. South Africa votes. All in The Week Ahead.
2016 Summer Olympics begin in Rio
On Friday, world athletes will gather in Rio de Janeiro to begin the Olympic Games. Friday will be marked by the opening ceremony, followed next week with events in archery, boxing, equestrian competitions, diving, and several other of the Games’ 2 dozen+ events. The Games will continue in the 2 weeks following, and are likely to distract public attention for many countries away from their domestic concerns and towards country performance.
The top medal winners by country in the 2012 London Games were the United States (103), China (88), Great Britain (65) and Russia (79). These numbers are not likely to be replicated, in part because the host country’s Olympic team is under major pressure to perform at and above expectations. Additionally, many of Russia’s teams have been under a cloud of controversy for state-sponsored doping, and several Russian teams have been banned from competing (almost 1/3 of Russian competitors have already been banned).
One of the other questions hovering over the Games is whether things will go off as planned. As of just a few weeks ago, several of the water areas for the sailing and rowing teams were still unsafe, Rio police have been protesting that they lack the necessary resources to keep the Olympics safe, and the metro system expansion was delayed and even then it didn’t bring people directly to the events.
Bank of England to set interest rates as growing number of banks and MPs push for stimulus
On Thursday, the Bank of England will release its assessments of the UK economy, including inflation. It will also release its benchmark interest rate, which is not expected to change, though skittishness from previously hawkish Bank of England members could tilt the scale for an interest rate cut.
Several policymakers have called for the Bank of England to enact stimulus to prevent the UK economy from going into recession. Although the Bank of England has been forthright in its assessment of the potential damage of Brexit to the UK economy and its willingness to act should credit or liquidity freeze up, it would seem strange for the BoE to engage in any significant stimulus action when the UK government has taken no formal steps to actually withdraw the UK from the European Union (although this view is not universally held within the bank).
Additionally, as many policymakers themselves have the tools to engage in stimulus spending (particularly given how low interest rates are, the costs of borrowing likely haven’t been so low for so long) and with the removal of fiscally conservative George Osborne as chancellor of the exchequer, it seems likely that the BoE would take a more wait-and-see approach before adopting major monetary policy action (particularly given the brand new government).
Major Muslim political leaders meet in Jakarta for economic conference
From Tuesday to Friday, Muslim leaders will meet in Indonesia for the World Islamic Economic Forum. Slated to attend are the president and prime minister, respectively, of Indonesia and Malaysia, as well as the president of the Islamic Development Bank.
Islamic finance has taken on an increasingly prominent position as several Middle East states (particularly Gulf States) have sought to ensure that investments comply with Islamic law. This would include not investing in companies that produce alcohol or weaponry (among other items), proscribing the use of interest in certain assets (which could be considered usury), and generally avoiding risk. Although starting from a low point, Islamic finance has had growth rates exceeding 15%, and Islamic finance has gained prominence in Europe and elsewhere as a potentially safe and ethically based investment platform.
Economic data pairs with end of Conventions as presidential candidates move to final stretch
On Monday, the Institute for Supply Management will release its index of factor activity in the U.S. for July, with many expecting continued positive movement. This will be followed on Tuesday with U.S. vehicle sales followed on Friday and U.S. consumer spending data from the Department of Commerce. On Friday, the Labor Department will release July unemployment figures (economists have projected a 175,000 increase in jobs while the unemployment rate remains at 4.9%).
As the nominating conventions for both parties concluded last week, the election campaigns of Hillary Clinton and Donald Trump move into high gear as the two candidates and their surrogates crisscross the nation to secure votes from key constituencies and swing states. Economic data from now until early November will be given heightened attention in U.S. politics as both candidates seek to capitalize on numbers that play into their narrative. On Donald Trump’s side, his near-apocalyptic outlook on the U.S. economy (as seen in his acceptance speech) means that any negative economic data – a rise in unemployment, a decline in investment or manufacturing, or decreased consumer confidence – will play into his narrative of U.S. economic decline. On Hillary Clinton’s side, positive economic data can play into the argument that she will continue President Obama’s legacy on strengthening the U.S. economy and/or that Democrats represent a pair of safe hands in dealing with complex economic problems.
South Africans head to the polls for local elections
On Wednesday, South Africa will hold local government elections for the 278 cities and other municipalities in the country, though most of the attention is focused on the big cities. President Jacob Zuma, himself under several controversies that may tie him up in court as he seeks to vacate a June ruling from South Africa’s highest court that he face corruption charges, is hoping to avoid an embarrassing setback for his ruling African National Congress (ANC) and the rise of the opposition party Democratic Alliance (DA).
He appears likely to be at least somewhat unsuccessful in his endeavor; polling from Johannesburg, Pretoria, and Nelson Mandela Bay have shown the DA gaining ground as the ANC’s support has fallen in some places by half. However, even if the ANC fails to gain a majority in these cities and the DA rises as the largest opposition party, governance itself may be difficult. The DA has signaled its intent to forge a coalition with the Economic Freedom Fighters (EFF), though the two parties disagree on just about anything (particularly economic policy). If the DA and EFF are able to forge a successful coalition, they could be in a much stronger position against the ANC in national elections, particularly if Jacob Zuma remains both head of the party and mired in corruption accusations.
The Week Ahead provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, The Week Ahead presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
The Week Ahead is written by GRI analyst Brian Daigle.
