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The week ahead is a festive one for the two largest BRICS economies. As China ushers in the Year of the Snake, Brazil will celebrate carnival. But it’s not all fun and games for the BRICS this week. Over the coming days, Russia’s central bank will announce its latest monetary policy decision. India will release trade, industrial production and inflation data. And South Africa will report on retail sales and mining output. Here is your guide.
Brazil’s annual carnival celebrations began on Friday. For five days, locals and tourists will enjoy the colourful costumes, parades and parties that make the event one of the world’s most recognised parties. Authorities estimate that roughly six million people – including more than 900,000 tourists – will participate in Rio de Janeiro’s extravaganza, the country’s largest.
When the festivities conclude on Wednesday, Latin America’s largest economy will get back to business. The central bank’s weekly survey of market expectations and weekly trade balance figures are the first releases on this week’s economic calendar.
On Thursday, markets will focus on the Foundation Institute of Economic Research (Fipe)’s weekly consumer price index (CPI) readings. Fipe’s weekly index – a measure of inflation in São Paulo, Brazil’s largest city – is one of the country’s earliest indicators of inflation. Markets expect 1.07% monthly rise, up slightly from last week’s 1.04% uptick.
The Getulio Vargas Foundation (FGV) will close out the data week on Friday with the release of its most recent general price index (IGP-10) data. The IGP inflation series is a weighted measure of wholesale (60%), consumer (30%) and construction cost (10%) rises. This week’s release covers the period from January 11 to February 10. Economists expect the index to show that prices rose 0.44% on a monthly basis, up slightly from 0.42% during the same period in December and January.
In an interview published on Thursday, bank chief Alexandre Tombini said that he expects inflation to slow in the second half of 2013.
Russia will release December’s trade figures on Monday. The country’s trade surplus increased to $15.4-billion in November from $14.5-billion in October. Exports declined 4.0%, year on year, to $45.4-billion. Imports decreased 1.0% to $30.1-billion.
In a written research comment VTB Capital analysts wrote, “We calculate that the trade surplus might reach $18.6-billion in December.” If the forecast – which is slightly above market expectations for an $18.1-billion surplus – proves accurate, December’s surplus would be the third largest for 2012.
On Tuesday, the Bank of Russia will announce this month’s monetary policy decision. Despite mounting calls from government and business for a rate cut, most economists expect officials to leave the bank’s benchmark refinancing rate on hold at 8.25% this week.
Policymakers are confronting a frustrating mix of high inflation and low growth and are believed to be waiting for signs of an economic turnaround or moderating price pressures before acting. The country’s headline inflation rate jumped to an annual pace of 7.1% in January from 6.6% in December, well above the central bank’s 5.0% to 6.0% target. The country’s economy slowed to 2.2% growth in the fourth quarter of last year and to 3.4% growth for 2012 as a whole, down from 4.3% in 2011.
Finally, Russia’s data week may close with last month’s industrial output figures on Friday. Russia’s industrial production unexpectedly slowed to its weakest level in eight months in December, climbing a mere 1.4% from a year earlier. Markets expect the same level of growth in January.
India’s Ministry of Commerce will release last month’s trade figures this week. The country’s trade deficit narrowed to $17.7-billion in December from $19.3-billion in November, but may have widened again in January.
Analysts at 4CAST expect the trade figures to show that exports – which account for roughly 20% of India’s gross domestic product (GDP) – grew by 1.9% in January from a year earlier, ending eight months of decline. But imports are predicted to have risen 9.4% – up from 6.3% growth in December – swelling January’s trade gap to $19.6-billion.
Elsewhere on this week’s calendar, Tuesday will bring December’s industrial production numbers. Markets expect the release to show that output at factories, mines and utilities likely rose 1.1%, year on year, in December after shrinking 0.1% in November.
On Thursday, investors will focus on the country’s latest wholesale price index (WPI) reading. India’s annual inflation rate eased to a three-year low of 7.18% in December – and is expected to have slowed further to 6.98% last month – but remains the fastest in the BRICS.
Stubbornly high inflation is limiting the central bank’s room to manoeuvre in the face of slowing growth. India’s Central Statistics Office forecast last week that GDP will rise 5.0% in the 12-months through March, the lowest rate of growth for Asia’s third largest economy since the 4.0% expansion recorded in the 2002-2003 fiscal year. The Reserve Bank of India reduced rates at its January meeting, but indicated limited space for further easing as a result of price pressures.
Chinese markets will be closed this week in observance of the New Year and Spring Festival. No economic data releases are scheduled.
South Africa’s data week will begin on Wednesday with Statistics South Africa (Stats SA)’s release of December’s retail sales figures. Sales quickened to 3.4% year on year growth in November, but are widely expected to have decelerated in December. Consensus is for lacklustre growth of 1.2%, year on year.
South Africa’s consumers, availing themselves of cheap credit, were a key driver of growth in the continent’s largest economy last year. Retail and automotive sales were the only two major economic indicators to show steady growth in 2012. But tighter credit and other factors are expected to dampen retail sales in 2013.
In a recent research note, economists at South Africa’s Nedbank wrote, “sales are likely to remain moderate during 2013 as weak consumer confidence, heightened worries about job security and high debt make consumers more cautious about spending on non-essential items.”
Following Wednesday’s retail figures, markets will turn their attention to December’s wholesale trade, motor trade and mining output figures. The mining numbers will be the most scrutinised of the three releases.
South Africa’s mining sector is hugely important to the country’s economy. But the industry, which comprises approximately 9.0% of GDP, directly employs roughly half-a-million people and accounts for two-thirds of the country’s exports, has fallen on hard times.
A series of illegal strike actions, policy uncertainty, rising labour and electricity costs and falling metals prices hit the sector hard in 2012. On a seasonally adjusted basis, mining output fell 11.0% in the three months through November.