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U.S. Employment Gain to Brazil Contraction: Global Economy

Data this week will probably highlight a divergence in global growth. Employers in the U.S. hired more workers in November, and the government in the U.K. may raise its economic forecast for the first time in three years. Conversely, Brazil’s economy may have contracted in the third quarter for the first time in two years.

U.S. PAYROLLS

-- Employment rose by 183,000 workers last month after a 204,000 gain in October, putting the world’s largest economy on track to show the biggest payroll gain this year since 2005, according to the median forecast of economists surveyed by Bloomberg before a Dec. 6 report from the Labor Department. The jobless rate fell to 7.2 percent, matching a five-year low, from 7.3 percent, the survey also showed.

-- A bigger-than-projected increase in October payrolls raised the odds that the Federal Reserve would begin to trim its monthly bond purchases as soon as this month, according to economists such as Joseph LaVorgna. “Another month of solid job gains (inclusive of revisions) increases the probability that policymakers will taper when they meet at the December 17-18 FOMC meeting,” the chief U.S. economist at Deutsche Bank Securities in New York said in a note. LaVorgna forecasts payrolls increased by 185,000 last month.

-- Central bankers may want to wait a little longer to cut back, even if employment continues to grow, according to James Marple, a senior U.S. economist at Toronto-Dominion Bank in Toronto. “Outside of a crisis, the Fed has never changed policy course at the end of December,” Marple wrote in a research note. “Moreover, while job growth is holding up, real GDP growth is likely to decelerate in the fourth quarter. Given a still high level of uncertainty around fiscal policy, this will likely be enough to forestall the Fed into the New Year.”

U.K. FISCAL PLANS

-- Chancellor of the Exchequer George Osborne will unveil new economic forecasts during his Autumn Statement in Parliament on Dec. 5. For the first time since 2010, his fiscal watchdog is on course to raise rather than lower its growth predictions, while the economic revival is boosting tax receipts and helping Osborne beat his budget targets.

-- “The chancellor is going to enjoy delivering the Autumn Statement significantly more than similar exercises in previous years,” said Philip Shaw, an economist at Investec Bank in London. “However, he is likely to effuse an optimistic rather than a celebratory tone, partly because the job of delivering sustainable borrowing is nowhere near complete and that downside risks remain.”

EURO-AREA INTEREST RATE

-- The European Central Bank will probably keep its benchmark rate at a record-low 0.25 percent on Dec. 5 after cutting it by a quarter-point in November, citing low inflation. The decision, though, doesn’t mean that last month’s loosening was the last step from ECB President Mario Draghi, according to Peter Vanden Houte at ING Bank NV in Brussels.

-- “The recovery has legs, though there are clearly still financing problems in peripheral countries,” Vanden Houte said in a Nov. 28 note. “With Draghi more or less suggesting that the ECB won’t tolerate deflation in adjusting countries as part of their rebalancing process, it means that the ECB will have to conduct its monetary policy geared to the weakest link. That suggests that the rate cut was probably not the final move from the ECB.”

BRAZIL GDP

-- Brazil’s economy probably contracted 0.3 percent in the third quarter, according to the median estimate of economists surveyed by Bloomberg before the national statistics institute releases data on Dec. 3. That would be the first time the economy has shrunk in two years.

-- “The news that the economy is not growing reflects the negative moods toward the country,” Enestor dos Santos, principal economist at Banco Bilbao Vizcaya Argentaria, said by telephone from Madrid. “If you have a contraction, there’s no way to highlight something positive.”

-- While Brazil may contract in the third quarter, the outlook has improved from a few months ago, according to Roberto Padovani, chief economist at Votorantim Ctvm Ltda. “Economic data as a whole has been a bit better than expected and the government has adopted more cautious speech regarding economic policy,” Padovani said by phone from Sao Paulo.

CHINA MANUFACTURING

-- In China, a gauge of manufacturing from HSBC Holdings Plc and Markit Economics to be released tomorrow may show factories slowed down in November. The figure would contrast with a greater-than-forecast gain in the Purchasing Managers’ Index reported today by the National Bureau of Statistics and China Federation of Logistics and Purchasing.

RESERVE BANK OF AUSTRALIA

-- The central bank will probably keep its benchmark interest rate unchanged at a record-low 2.5 percent when it meets on Dec. 3 for the final time this year as policy makers reiterate concern its currency remains too strong. The following day, government data may show economic growth slowed in the third quarter from a year earlier as the currency’s strength impedes a rebalancing away from a mining investment-led expansion.

-- “We would expect RBA officials to continue their verbal assault on the currency in coming months,” Sally Auld, a Sydney-based interest-rate strategist at JPMorgan Chase & Co., said in a research report. “But we also think there is a good chance the RBA might back up its words with action; this could occur by executing a modest rise in the Bank’s foreign exchange reserves. This will be something to keep an eye on.”

NORWAY’S INTEREST RATES

-- Norway’s central bank on Dec. 5 probably will keep its benchmark interest rate at 1.5 percent and revise its policy rate path down as inflation remains weaker-than-expected by Norges Bank, according to Goldman Sachs Group Inc.

-- “We expect Norges Bank to push back its planned first hike from around the summer of 2014 to the autumn of 2014,” Lasse Holboell Nielsen, executive director at Goldman in London, said in an e-mailed note. Norway’s underlying inflation rate fell from 2.5 percent in August to 1.7 percent in September before rising to 1.9 percent in October.

To contact the reporter on this story: Carlos Torres in Washington at ctorres2@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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