Spot checks on the global economy and a dilemma for the ECB

The euro sculpture is seen outside the headquarters of the European Central Bank (ECB) in Frankfurt, November 5, 2013. REUTERS/Kai Pfaffenbach (Reuters)

By Jeremy Gaunt LONDON (Reuters) - Take your pick of the most important economic event of the coming week - forward-looking global activity data, interest rate decisions in Europe or a spot-check on U.S. jobs after a month of particularly bad weather. Given that the payrolls data - usually the premier data event at the start of any month - is likely to be skewed by blizzards, best start with the global picture. Purchasing manager surveys, known as PMIs, will show the intentions of manufacturing and services businesses across the world as the surveys are released over the first few days of the week. They will be eyed for signs of further slowing in China, indications as to whether Europe's growth gathering any momentum, and for confirmation that the U.S. economy is on its way up although by no means there yet. The Chinese manufacturing figure is expected to dip slightly and show barely any growth - a worry for already battered emerging markets as well as a drag globally. Preliminary figures from the euro zone have already pointed to only modest growth. What is expected from the United States depends on the survey, but the overall picture is expected to be relatively steady with any glitch blamed on the weather. This would fit both with Friday's downward revision of fourth quarter growth and with the testimony to Congress of Janet Yellen, who chairs the U.S. Federal Reserve. Barclays economists paraphrased the latter as: "While the economy has strengthened and the outlook for the economy in the coming years has improved ... the economy is several years or more away from operating normally." Much the same is expected from the snow-blown jobs data - non-farm payrolls - on Friday. Reuters polling suggests 160,000 new jobs were created in February, up from 113,000 in January. But there is scope for disappointment. "Non-farm payrolls (are) likely remain subdued," economists at ING said in a note. "Nonetheless, we believe that the underlying story is good with recruitment firms suggesting that businesses are looking to hire, but the weather has made scheduling interviews difficult." TO MOVE OR NOT TO MOVE Europe's outlook will be dominated by the monthly meeting of the European Central Bank on Thursday and its accompanying news conference by President Mario Draghi. The ECB is struggling to balance fragile growth and very low inflation with various strictures on what it can do, all wrapped up with a commercial banking system that is reluctant to lend. A Reuters poll last week showed a majority of economists do not expect to bank to cut rates from its current 0.25 percent level. But a growing number - 26 of 78 - think they will do so on Thursday, by 5 to 15 basis points. That was the strongest view for an easing in policy in Reuters polls since November last year when the ECB surprised markets by cutting the benchmark rate by 25 basis points. So the policy decision looks like a close call, particularly since Draghi talked at his last post-meeting news conference about getting more information before deciding whether to take fresh policy action. Since then, gross domestic product growth has come in slightly stronger than expected. Also inflation - another worry - has not weakened further. The latest reading of 0.8 percent year on year was unchanged from the prior month. The ECB staff will be giving their updated economic outlooks to add grist to Draghi's mill. The ECB says it is not worried about deflation - the actual falling of prices - but that is before the new forecasts. Even if the bank doesn't cut on Thursday it may take other actions. One is to suspend its practice of soaking up the money it spent buying sovereign bonds. This would stop short of the large-scale money-printing quantitative easing that Germany opposes. ACTIVELY NOT DOING ANYTHING Europe's other major central bank - the Bank of England - also meets on rates in the coming week. It is a runaway bet that it will do nothing. Policymakers have stressed with remarkable unity that they are in no hurry to raise rates and, for the time being, there is no economic pressure for a hike. But longer term, the central bank's stance - rates at just 0.5 percent - is not in keeping with Britain's improving economic climate. As Rob Wood, chief UK economist for Berenberg Bank, puts it: "If we started from a blank sheet of paper, it seems unlikely that the sensible decision would be to set interest rates at a record low in an economy growing at trend, with high and rising recruitment difficulties, and unemployment less than 1 percentage point above (equilibrium) and falling fast." What is eventually likely to prompt a change is a sign that wages are starting to pick up. (Additional reporting by Paul Carrel and William Schomberg; Editing by Ruth Pitchford)

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