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Inflation data in Brazil, growth figures in Russia, a long-awaited rates decision in India, manufacturing snapshots in China and a slew of data in South Africa will keep BRICS watchers on their toes this week. Here is your guide to the data releases, meetings and other events likely to move markets over the coming days.
Inflation concerns are mounting in South America’s largest economy. Survey results released by the central bank last week showed heightened inflation expectations among economists and figures released by Brazil’s statistics agency on Wednesday showed that consumer inflation was 0.88% in the month to mid-January and 6.0% over the previous 12 months. Government targets 4.5% inflation.
Despite lacklustre growth prospects, markets increasingly suspect price pressures may eventually force policymakers to hike record low interest rates. Given that backdrop, investors will be paying particularly close attention to a series of inflation measures scheduled for release over the coming days.
On Monday, the Foundation Institute of Economic Research (Fipe) will release its weekly consumer price index (CPI) for São Paulo – one of Brazil’s earliest indicators of inflation – and the Getulio Vargas Foundation (FGV) will release its monthly national construction cost index (INCC).
Markets expect Fipe’s index to show that prices rose 0.99%, month on month, last week, up from a 0.96% rise in the previous monthly period. FGV’s construction cost index rose 0.23% in November, 0.29% in December and is expected to show a further rise in January.
More inflation data will follow on Wednesday, with the release of January’s producer price index (PPI) readings and FGV’s monthly general price index (IGP-M), and on Friday, with FGV’s weekly consumer inflation (ICP-S) figures. Of the three, investors will be watching the IGP-M, the reference measure used to set the prices of public services, most closely. Markets expect a 7.96% year on year rise.
Fourth quarter gross domestic product (GDP) data will dominate Russia’s economic calendar this week. Figures are expected on Thursday or Friday.
The country’s real GDP growth slowed to 2.9% in the July to September quarter from 4.0% in the previous three months of 2012. Economists surveyed by Bloomberg forecast a further slowdown to 2.4% growth in the fourth quarter. If the consensus forecast proves accurate, it would mark the slowest pace of economic expansion for the country since the beginning of the post-recession recovery which began in 2010.
Prime Minister Dmitry Medvedev said in a speech last week that Russia wants to maintain steady GDP growth of 5.0%, but most economists believe this will be difficult to achieve. Figures released last week showed that investment levels fell unexpectedly in December from a year earlier. Statistics showed a 0.7% decline in fixed-capital investment, the biggest drop since January 2011. Lower investment levels are exacerbating the effects of weak export demand, constraining growth in the country.
Additional data covering real wages, also released last week, showed that wages rose 0.3%, year on year, in December. This was slowest pace of expansion in more than three years. Anaemic wage growth suggests that consumer spending – which accounts for roughly half of GDP – may also come under pressure over the coming months.
In addition to GDP data, investors will watch for manufacturing purchasing managers’ index (PMI) readings on Friday. December’s release showed the index sitting right on the 50.0 mark separating expansion from contraction.
Tuesday’s rates decision by the Reserve Bank of India (RBI) is the dominant economic event on the subcontinent this week. With inflation pressures easing, markets expect policymakers to lower rates for the first time in months in a bid to bolster growth. According to a Reuters’ survey, economists widely anticipate a 25 basis point cut to the country’s 8.0% repo rate, a quarter point cut to the bank’s 7.0% reverse repo rates, and no change to the 4.45% cash reverse ratio.
Beyond the Reserve Bank’s announcement, investors will be on the lookout for a number of high profile corporate reports over the coming days as earnings season winds down. Highlights on this week’s calendar include ICICI Bank, which is likely to announce its third quarter results on Thursday, and Bharti Airtel – the country’s largest telecommunications services company – which will follow with results on Friday.
Analysts expect ICICI to report a 20.8% rise in net profits and a 20.2% increase in net income. Bharti Airtel is likely to report more disappointing results. Net profit is expected to decline by 14.7%, but sales may have grown by roughly 8.0%.
Finally, also on Friday, HSBC will release its latest manufacturing purchasing managers’ index (PMI) for India. The index rose from 53.7 in November to 54.7 in December, the biggest monthly gain since January 2012. New orders increased for the 45th month in a row and overall export orders showed further strength, suggesting this week’s release will continue to paint a positive picture.
China’s two purchasing managers’ indices (PMIs) are the big items on this week data calendar. Official PMI readings from the China Federation of Logistics and Purchasing (CFLP) and separate figures from HSBC are both due on Friday.
CFLP’s index – which focuses on large, state-owned firms – held steady at a seven-month high of 50.6 in December. The index has remained above the 50.0 mark separating expansion from contraction for three straight months and is widely expected to have shown further improvement in January. Markets anticipate a climb to 51.0. A modest rise in the overall index and an expected acceleration in production signals that the country’s economic recovery continues to gather momentum.
HSBC’s measure – which surveys smaller firms – is also expected to show improvement. Flash results – which represent roughly 90% of total responses – released last week showed that the index rose to 51.9 in January, a two year high. If final readings confirm preliminary results, January’s figures will represent the fifth month in a row in which China’s manufacturing sector has improved its performance and the third straight month in which the index has been in expansion territory.
In written comments on last week’s flash results, Qu Hongbin, HSBC’s chief China economist, said, “Despite the still tepid external demand, the domestic-driven restocking process is likely to add steam to China’s ongoing recovery in the coming months.”
China’s economy rebounded in the fourth quarter of 2012 after seven straight quarters of slowdown. Market consensus is for an 8.1% expansion in 2013.
It’s a busy week for data in South Africa. On Monday, Statistics South Africa (Stats SA) will release December’s liquidations and insolvencies data. Last month’s release showed that liquidations in Africa’s largest economy decreased by 22.1% in the first eleven months of 2012 compared to the same period in 2011.
No significant data releases are scheduled for Tuesday but, on Wednesday, economists and investors will turn their attention to the South African Reserve Bank (SARB)’s latest money supply and private sector credit extension data. Markets expect M3 money supply to have increased by 6.10% in December. Private sector credit extension likely picked up to 9.72% year on year growth last month.
On Thursday, the South African Revenue Service (SARS) will release December’s preliminary trade numbers, Stats SA will issue December’s producer price index (PPI) report, Ernst & Young will release its fourth quarter financial services index and Absa will release fourth quarter housing data.
Economists expect Thursday’s trade figures to show a significant improvement from November’s disappointingly large R7.9-billion deficit. Consensus is that the country’s trade gap narrowed to R2.0-billion in December. Markets expect price rises at the factory gate to have decelerated to 0.2% monthly growth in December from 0.3% growth in November.
Finally, on Friday, the Bureau for Economic Research will release January’s purchasing managers’ index (PMI). This forward looking indicator of economic activity contracted for the fourth consecutive month in December. Given recent labour disruptions across multiple sectors, analysts are not optimistic for January’s reading.