EUROPEAN woes will stay the focus of domestic markets this week, but they will also be affected by a raft of key economic data which could fuel more speculation that interest rates will fall this year.
Inflation figures due on Wednesday will grab centre stage, with consensus forecasts predicting that consumer inflation fell back inside its 3%-6% target range last month for the first time since September.
A slowdown in the pace of food price increases is likely to help curb the annual rise in the consumer price index to 5,9% from 6,1% in March, according to consensus forecasts from Bloomberg. Fuel prices rose, but at a slower pace than the previous month.
Views are mixed as to whether inflation will continue to fall this year, given the effect of the rand's depreciation, which fans price pressures by making imports more expensive. The currency has depreciated by about 9% against the dollar since the start of last month.
However, the declining trend in oil prices should help to offset some of the upward pressure on prices spurred by the rand's response to global risk aversion.
Figures from the Reserve Bank's June quarterly bulletin, due on Thursday, will provide insight into the economy's dynamics in the first quarter. Official figures have already shown that growth slowed to 2,7% from 3,2% in the final quarter of last year. However, the bulletin will reveal the performance of the demand side of the economy during that period - notably household consumption and investment.
Growth in household consumption is expected to slow significantly from 4,6% in the final quarter of last year, eroded by higher prices for fuel and electricity, as well as waning consumer confidence. That is worrying as consumer spending is the economy's main engine of growth. Figures released last week showed that retail sales stuttered to 1% in April compared with the same month last year, its slowest pace since February 2010.
At the same time, manufacturing output has stalled, mining production is plunging and business confidence plummeted during the second quarter of this year.
The data will support speculation that the Bank will cut interest rates later this year - a step priced in by local money markets. "With headline CPI (consumer price inflation) likely to dip below 6% in May, the scale is gradually tipping towards the potential for further loosening in SA," KADD Capital economist Elize Kruger says. Independent forecasts predict economic growth will slow to about 2,8% this year, from 3,1% last year. But some analysts expect 2,3%.
An employment and earnings report for the first quarter of this year, due tomorrow, will also provide food for thought.
Statistics SA has already released a labour force survey which showed that SA's jobless rate rose unexpectedly to 25,2% in the first quarter of this year from 23,9% in the previous quarter. But tomorrow's survey reflects responses from business and is seen by many as a more reliable indicator.
Generally there is an easing of employment between the fourth quarter and the first quarter, as temporary seasonal employment falls away.
But now other factors will come into play, including the weaker domestic economy and work stoppages at the country's platinum and gold mines, says Stanlib economist Kevin Lings.
The Bank's quarterly bulletin will also unveil the extent to which SA's current account deficit, its broadest measure of goods and services, widened in the second quarter. Consensus forecasts predict the shortfall ballooned to 4,5% from 3,6% in the first quarter, in response to a marked deterioration in the country's trade balance.