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Employment and inflation updates in Brazil and Russia, corporate earnings reports in India, a manufacturing snapshot in China and a rates decision in South Africa are the big events on the BRICS’ economic calendar this week. Here is your guide to the data, meetings and other events likely to move markets over the coming days.
Brazil’s week will begin with job creation numbers, an inflation reading from the Getulio Vargas Foundation (FGV), weekly trade balance figures and results from the central bank’s latest weekly survey of market expectations.
Markets expect Brazil’s monthly General Roll of Employment and Unemployment (CAGED) to show a decline of 401,000 in December. Despite the large seasonal drop in employment forecast by most economists, labour conditions in Brazil remain tight.
Analysts at 4CAST expect FGV’s General Price Index-Market (IGP-M), the inflation index used in most contracts, to have risen 0.45% between December 21 and January 20, up from 0.41% over the same period in November and December.
Two additional inflation measures, FGV’s weekly IPC-S consumer inflation index and the Brazilian Institute of Geography and Statistics’ (IBGE) IPCA-15 monthly index will follow on Wednesday along with current account and foreign investment data. Markets expect both price indices to show inflation on the rise. Economists at Itaú BBA expect Brazil’s current account deficit to equal 2.2% of gross domestic product (GDP) in 2012 as a whole. Foreign investment, they believe, will amount to 2.8% of GDP.
On Thursday, the country’s central bank will release the minutes of its 16 January meeting and FGV will release consumer confidence index readings. Markets forecast a slight decline in sentiment.
Brazil’s data week will conclude with December’s outstanding loans, personal loan default rate, private banks lending and total outstanding loans data on Friday. Lending growth and defaults at Brazilian banks showed signs of recovery in November.
December’s producer price index (PPI), expected on Monday or Tuesday, is the first major data release on Russia’s economic calendar this week. Consensus is for a slight acceleration in the pace of price rises at the factory gate from 6.7% in November to 6.8% in December.
Weekly consumer price index (CPI) and monthly industrial output figures will follow on Wednesday.
Consumer inflation quickened to 6.8% from a year earlier as of January 9th, up from 6.6% in December and 6.5% in November. Inflation was ranked as the second biggest problem facing the country by respondents to an All-Russia Centre for the Study of Public Opinion survey published January 9th, but Alexei Ulyukayev, first deputy chairman of Russia’s central bank, said last week that he expects inflation to slow in the second quarter.
Industrial production accelerated for the first time in four months in November to 1.9% growth, year on year. But economists expect that a combination of weak external trade conditions and ebbing consumer demand contributed to a drop to 1.8% annual growth in December.
On Thursday, statistics covering investment in productive capacity, real wages, retail sales and unemployment will be released along with the central bank’s foreign exchange and gold reserves report. Analysts at Lloyds Bank expect investment to have picked up to 1.8% annual growth in December from 1.2% in November, that real wage growth rose to 6.7% from 6.5% and that retail sales picked up slightly to 4.5% annual growth from 4.4% in the previous month.
Positive earnings reports, widespread expectations of a rate cut by the Reserve Bank of India (RBI) later this month and optimism that the country’s economy is on the mend sent the benchmark BSE Index above the psychologically important 20,000 mark for the first time in two years on Friday. The index rose 0.38%, or 75.01 points, to end at 20,039.04. The broader NSE Index rose 25.20 points to end at 6,064.20, adding 1.9% for the week.
Expectations of positive results in the week ahead are expected to continue to support strong share performance. Highlights include Asian Paints, Cairn India and the Housing Development Finance Corporation on Monday, Hindustan Unilever on Tuesday, Reliance Communications and Zee Entertainment Enterprises on Wednesday, Larsen & Toubro on Thursday and Maruti Suzuki and Reliance Power on Friday.
Bullishness in the share market – coupled with relief over last week’s announcement that implementation of the government’s controversial General Anti-Avoidance Rule (GAAR) will be postponed until 2016 – is likely to provide further support to India’s currency in the week ahead as well.
The rupee strengthened to a two and half month high against the dollar on Friday and traders say further appreciation against the dollar, pound and euro is likely over the coming days. Government bond yields are likely to continue their slide as expectations of a rate cut by the RBI mount.
Investors will also be watching for a potential cement price hike this week, following last week’s diesel price rise for bulk consumers, and for a possible announcement of government divestment plans for Oil India, the National Thermal Power Corporation (NTCP), Engineers India (EIL) and the Steel Authority of India (SAIL). Selling shares in state companies is a key component of government’s plan to reduce the country’s deficit to 5.3% of gross domestic product, hopefully averting a threatened downgrade to the country’s credit rating as a result.
The big item on China’s calendar this week is Wednesday’s flash purchasing managers’ index (PMI) reading from HSBC. Flash results represent roughly 90% of responses and are released one week in advance of final readings. A solid rise in new orders over the past few months suggests that the index will rise to 51.9 in January from 51.5 in December, which was the highest index reading since May 2011. Any reading above the 50.0 mark indicates expansion for the country’s massive industrial sector.
China’s industrial production hit a low of 8.9% growth in August before picking up in the last four months of the year. Nevertheless, annual production growth slowed to 10.0% in 2012, a 3.9% decline from 2011’s rate.
Gross domestic product (GDP) figures released on Friday showed that China rebounded in the fourth quarter of 2012 after seven straight quarters of slowdown. For 2012 as a whole, the economy expanded by 7.8%, its lowest rate of growth since 1999. Market consensus for 2013 is for an 8.1% expansion.
Despite widespread expectations of improved performance in the year ahead, China’s economy still faces challenges. While inflation was just 2.6% last year, it is expected to rise this year. Coupled with financial risks posed by the country’s shadow banking industry – a complex, nebulously regulated network of financing channels outside of the country’s formal banking system – and a possible property bubble, rising price pressures may put pressure on authorities to tighten monetary policy in the second half of the year.
A rates decision by the country’s central bank and December’s consumer price index (CPI) data will dominate South Africa’s economic news this week. Economists expect the South African Reserve Bank’s monetary policy committee (MPC) to leave the bank’s repo rate on hold at a four-decade low of 5.0% at the conclusion of their three day meeting on Thursday.
Persistent labour unrest in the mining and trucking industries in 2012 and, more recently, in the country’s agricultural sector has darkened South Africa’s growth outlook, but rising inflation has left policymakers with little room to manoeuvre.
The Reserve Bank expects a 2.9% expansion to South Africa’s economy in 2013, but some believe that figure will be difficult to achieve. All three major ratings agencies – Standard & Poor’s, Moody’s and Fitch – have negative outlooks on the country. Although officials might be tempted to loosen monetary policy even further in a bid to boost growth, inflation concerns prohibit it.
South Africa’s year on year inflation rate has been accelerating since July may breach the 6.0% upper limit of the Reserve Bank’s inflation target range, at least temporarily, later this year. Wednesday’s CPI data is likely to show that prices rose 0.3% on a monthly basis in December and that, on an annual basis, consumer inflation likely rose 5.7% in December, up from 5.6% in November.
In addition to Wednesday’s CPI data, Stats SA will release November’s tourism accommodations, food and beverage sales and transport data on Monday along with October’s mineral statistics.