BRICS: The week ahead
February 18, 2013, 7:58 am

Retail sales figures and a growth snapshot will dominate Brazil’s economic calendar this week. Russia will release key investment and consumer numbers. India’s parliament will begin its annual budget meeting. China will return to work after last week’s SpringFestival and South Africa will report on inflation. Here is what to watch in the economic week ahead.

Brazil

Brazil’s data week will begin on Monday with an inflation gauge from the Getulio Vargas Foundation (FGV) and tax collections data from the federal tax authority.

Markets expect FGV’s general price index (IGP-10) to show that prices rose 0.36% on a monthly basis between January 11 and February 10, down from a 0.42% rise during the same period in December and January.

Brazil’s tax revenues fell for five consecutive months through October as President Dilma Rousseff’s government offered a series of tax breaks to stimulate the country’s economy, but began to rebound in November. Authorities collected 103.246 billion reais in tax revenues in December and economists expect January’s figures to show a slight rise to 103.900 billion reais.

More inflation data will follow on Tuesday as the Foundation Institute for Economic Research (Fipe) releases its weekly consumer price index (CPI) readings for São Paulo, Brazil’s largest metropolitan area, and FGV releases another of its IGP series. Analysts expect both measures to show a slight easing in price pressures.

Also on Tuesday, authorities will release Brazil’s latest retail sales data. Household spending has been a key driver of Brazil’s economic growth over the past decade, but sales have recently slowed. Economists expect that sales slowed further in December, to 7.0% year on year growth from 8.4% in November.

On Wednesday, proxy gross domestic product (GDP) readings are forecast to show that Brazil’s economy slowed to 0.20% monthly growth in December from a 0.40% expansion in November.

On Friday, analysts at 4CAST expect data to reveal that Brazil’s current account deficit widened to $10.9 billion in January from $8.4 billion in December, the largest on record. Foreign direct investment (FDI) covered Brazil’s current account deficit last year, but has fallen short over the past few months. January’s FDI figures will also be released on Friday.

Russia

Russia’s Federal Statistics Service will release January’s investment in productive capacity, real wages, retail sales and unemployment figures this week. Collectively, the data is likely to confirm that the country’s economy is losing further steam.

Russian investment unexpectedly contracted for the second time in four months in December, by 0.7% from a year earlier, as a pessimistic economic outlook led businesses to scale back their investment programmes. December’s drop was the largest since January 2011, but markets expect January’s data to show a rebound to 0.5% year on year growth. Increasing investment is a key objective of President Vladimir Putin’s government and Andrei Klepach, Russia’s deputy economy minister  has called lacklustre corporate investment levels the “Achilles heel” of the country’s economy.

Real wages grew at their slowest pace in more than three years in December, rising by a mere 0.3% from a year earlier, but economists are more optimistic for January. Consensus is for a 3.3% rise from a year earlier. In January, Russia’s economic development ministry forecast a 3.7% rise in real wages for 2013 as a whole.

Retail sales numbers are likely to show a slowdown to 4.8% annual growth from December’s 5.0% year on year increase. Consumer spending accounts for roughly half of Russia’s gross domestic product (GDP), so a pullback in spending is worrying. Russia’s economy grew 3.4% in 2012, down from a 4.3% expansion in 2011. Economists expect an expansion of around 2.0% during the first half of 2013, far below prime minister Dmitry Medvedev’s stated goal of stable 5.0% economic growth.

Russia’s unemployment rate fell to 5.3% in December from 5.4% in November, mainly as a result of seasonal factors. Analysts at Danske Bank expect the country’s unemployment rate to have risen to 5.7% in January, still a low rate by historical standards.

India

In the absence of any major economic indicators, India’s upcoming annual budget will dominate markets in the week ahead. The country’s parliament will begin its 2013 budget session on Thursday. Palaniappan Chidambaram, India’s finance minister  will present the government’s railway budget on February 26 and general budget on February 28.

The question on everyone’s minds is which audience the minister will address. Will he present an austerity budget, aimed at assuaging the credit ratings agencies threatening to cut India’s sovereign rating? Or will he unveil a populist plan to curry favour with voters in the run-up to state elections and a general election later this year?

Most economists believe Mr. Chidambaram will stick largely to the government’s current belt-tightening stance. The costs of a ratings downgrade are simply too high. India has a BBB-minus rating with a negative outlook from Standard & Poor’s and Fitch Ratings. This is the lowest rating among the five BRICS nations and just one notch above junk status.

Numerous media reports, citing a variety of government and bureaucratic sources, suggest that ruling Congress Party leaders have reluctantly endorsed the finance ministry’s plans to significantly curtail India’s public expenditures. But not everyone thinks this is a good idea. Pointing to Europe’s ongoing economic malaise, some economists argue that lower public spending, against a backdrop of weak consumer demand and disappointing levels of private investment, runs the risk of deepening India’s economic woes.

Mr. Chidambaram is expected to set next year’s spending target 10.0% lower than this year’s original goal. Citing a senior official at the railways ministry, news agency Reuters reported on Friday that the government’s 2013/14 railway budget will cut funding to the ministry by more than $2.0 billion. The reduced outlays would follow $1.8 billion in cuts endured by the railways in the current financial year.

China

China, the world’s second largest economy, returned to work on Monday following last week’s Spring Festival, the largest and most important holiday on the Chinese calendar. Over the coming days, analysts will be digesting a number of statistical snapshots of the festival for larger insights into consumer spending patterns.

The ministry of transport estimates that 399.0 million trips were taken via highway and water-based transport, an increase of 50.0 million over 2012. Airplane travel was up 18.0%, year on year, for a total of 6.4 million trips. And the country’s ministry of railways estimates that 34.7 million train trips were undertaken, an increase of 3.0 million over last year.

Despite the uptick in travel, is appears consumers spent less this year than last. According to a statement posted to the ministry of commerce’s website on Saturday, retail sales during last week’s celebrations of the Lunar New Year grew at their slowest pace in four years. Retail sales increased 14.7% from a year earlier to 539 billion yuan, down from a 16.2% rise in sales during 2012’s festivities.

The ministry of commerce’s numbers reflect sales at “major” retailers and restaurants in Beijing, Shanghai and Nanjing as well as in five central and eastern provinces of the country. China’s National Bureau of Statistics will release full retail sales figures for January and February on March 9.

The only significant data release scheduled for the week ahead is Monday’s January residential property price data from the National Bureau of Statistics. Economists expect a 0.9% monthly rise, which could be worrying for the country’s central bank.

Also of interest to BRICS-watchers over the coming days, Yang Jiechi, China’s foreign minister, will visit South Africa and Russia this week at the invitation of South Africa’s minister of international relations and cooperation Maite Nkoana-Mashabane and Sergey Lavrov, Russia’s foreign minister.

South Africa

Statistics South Africa (Stats SA) will release December’s tourist accommodation, transport and food and beverages sales data on Monday, but the big event on South Africa’s calendar this week is Wednesday’s consumer price index (CPI) release.

Consensus is that consumer prices rose 0.6% in January, an acceleration from December’s 0.2% monthly rise. On an annual basis, markets suspect that prices climbed 5.7%, year on year, in January, the same rate of increase observed in December.

Most analysts expect consumer inflation to temporarily breach the upper end of the South African Reserve Bank’s 3.0% to 6.0% target range sometime over the next few months before easing later in the year. The median forecast among 21 economists surveyed by Reuters in January is that inflation will average 5.71% in 2013.

With inflation within policymakers’ comfort zone, markets expect the Reserve Bank to leave rates on hold at a record low 5.0% throughout the remainder of the year to support growth. During last week’s State of the Nation address, President Jacob Zuma said that the government expects South Africa’s economy to grow 2.5% this year, down from a 3.1% expansion in 2012, and half the growth rate needed to make a meaningful dent in the country’s 24.9% unemployment rate.

On Thursday, Stats SA will release December’s civil cases for debt numbers. The number of civil summonses issued for debt in November dropped 23.9% from a year earlier. For the three months ended November, summonses dropped 21.9%, year on year. The total number of civil judgments recorded for debt decreased 15.2% over the same period and by 9.8% during the month of November. There was a 3.2% increase in the total value of civil judgments recorded for debt during the three months ended in November and a 1.4% increase in the month itself.