US non-manufacturing data watched for signs of recovery slowdown

The Bank of Japan and the Bank of England will both make policy announcements this week. In terms of data, highlights include the US Institute for Supply Management non-manufacturing survey, trade data for Japan, Germany and the UK as well as manufacturing, construction and industrial output in the UK.

Neither the Bank of Japan nor the Bank of England are expected to make any changes to their policies in the announcements on Wednesday and Thursday respectively. Monetary policy is expected to stay loose as central banks remain concerned about the prospects for global growth whereas inflation remains muted thanks to falling commodity prices.

The ISM non-manufacturing survey will be released on Monday. Recent data from the US has pointed to a slowdown in the pace of economic recovery with the ISM manufacturing survey indicating the slowest rate of expansion since 2013 and the non-farm payrolls series coming in below the consensus forecast by the most since 2009.

Japan is expected to have run a trade surplus for the eighth straight month in February. The data are released on Wednesday. The improvement in the current account is ascribed to a lower yen boosting exports while imports have been reduced due to the lower oil price.

Germany's trade balance fell in January to €15.9bn from €18.9bn in December, but was up year-on-year from the €14.7bn in January of 2014. Estimates for February will be released on Thursday.

Data released last month showed that the UK posted the largest current account deficit in 2014 since modern records began in 1948. This is due to a deterioration in the UK's overseas investment position as profits earned by British companies abroad have fallen, while the yield on foreign-owned assets in Britain has increased. Estimates for February, also out on Thursday, are expected to show that this deficit widened further.

Output for Britain's construction, industrial and manufacturing sectors will be released on Friday. The month-on-month figures are expected to be positive and point to an acceleration across the board, however the only year-on-year improvement is expected to be in construction with a 3.1 per cent decline becoming a 1.9 per cent improvement.

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