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Over the coming days, Brazil will report retail sales figures. Russia’s central bank will announce its latest rates decision. India will provide updates on trade, industrial production and inflation. China’s new president, Xi Jinping, will officially take power. And, in South Africa, officials will release current account, retail sales, manufacturing production and a host of other figures. Here is your guide to the BRICS in the week ahead.
Brazil
The first major release on Brazil’s light economic calendar this week is Thursday’s retail sales data. Core retail sales – excluding automobiles and construction materials – declined 0.5% from November to December, but markets expect to see a 0.3% jump in January. Broad retail sales showed 1.3% month on month growth and 5.0% year on year growth in December. Consensus is that sales rose 8.0% on an annual basis in January.
Also on Thursday, Brazil’s central bank will release the minutes of last week’s Central Bank Monetary Policy Committee (Copom) meeting. Economists will be looking for additional insights into the central bank’s thinking beyond the brief statement issued last week.
“Assessing the macroeconomic situation and the outlook for inflation the Copom decided unanimously to keep the Selic rate at 7.25 per cent [per annum], without a bias,” the committee’s statement read.
On Friday, the Banco Central do Brasil will release January’s monthly proxy gross domestic product (GDP) data and the Fundação Getulio Vargas (FGV) will release one of its general price index measures.
On a seasonally adjusted basis, Brazil’s economy expanded 0.26% from November to December. Markets expect an uptick to 0.70% growth in the first month of 2013. On a non-seasonally adjusted basis, growth probably picked up from 1.19%, year on year, in December to 4.45% in January.
The FGV’s IGP-10 is expected to show that inflation slowed to 0.20% monthly growth in the period of February 11 to March 10 from 0.29% during the same period in January/February. Brazil’s Deputy finance minister, Nelson Barbosa, said on Friday that the country’s inflation will slow gradually throughout 2013 toward the government’s 4.5% official target.
Russia
Russia’s central bank will take centre stage as officials gather for their monthly policy meeting.
Russia’s economy slowed to 3.4% growth in 2012 from 4.3% in 2011 and central bankers have been under intense pressure from government and business to lower rates to boost the country’s growth prospects in 2013. But Bank Rossii’s chairman Sergei Ignatyev – who is retiring in June – has repeatedly said that the bank will not lower rates until inflationary pressures subside.
Figures released last week showed that consumer price inflation rose to its highest level in 18-months in February. The annual inflation rate climbed to 7.3% from 7.1% in January, well above the bank’s 5.0% to 6.0% inflation target. In the week to March 4, inflation eased to 0.1% from 0.2% during the last week in February but, since the beginning of 2013, consumer prices have risen 1.6%. Prices rose 1.0% during the same period in 2012, according to the Federal Statistics Service.
Against that backdrop, analysts are nearly universal in their predictions that Bank Rossii will leave its benchmark rate on hold at 8.25% this week.
Other than weekly inflation figures on Wednesday and weekly foreign exchange and gold reserves – which fell to $523.4 billion in the week to March 1 from $524.0 billion a week earlier – on Thursday, no major data releases are scheduled in Russia over the coming days.
Finally, also of note this week, Russia’s foreign minister, Sergei Lavrov, and defence chief, Sergai Shoigu, will meet with their British counterparts, William Hague and Philip Hammond, in London on Thursday to discuss security issues. The two countries have long had a tense relationship but both sides are attempting to improve relations incrementally.
India
India will report February’s trade figures on Monday. The country’s trade gap widened to $20.0 billion in January from $17.7 billion in December, despite a jump in exports for the first time in nine months. Exports grew 0.8% to $25.5 billion but imports, driven by a 6.9% rise in oil imports, expanded 6.1% to $45.6 billion.
Analysts at 4CAST expect imports to have risen 5.4%, year on year, in February, significantly outpacing anticipated exports growth of 1.6%. Even if the markets’ consensus forecast for improvement proves accurate, policymakers will be disappointed. Officials had hoped to increase exports to $360 billion during the fiscal year ended in February, but will undoubtedly miss the target.
On Tuesday, economists and investors will turn their attention to the country’s latest industrial production numbers. December’s figures, which showed an unexpected contraction in industrial output of 0.6%, caused concern that India’s economy was slowing further, but January’s numbers may reassure investors that the worst is over for the country’s industrial sector.
Production in the country’s core sector – which is comprised of India’s eight key infrastructure industries and is responsible for roughly 40.0% of factory output – grew at an annualised rate of 3.9% in January. Strong performance in these industries is likely to have boosted overall industrial production during the first month of 2013. India’s Index of Industrial Production (IIP) likely rose 1.2% in January from a year earlier.
Finally, on Thursday, India will release last month’s wholesale price index (WPI). The country’s main measure of inflation eased to 6.62% year on year growth in January from 7.18% in December is expected to have slowed further to 6.59% growth in February. Easing inflationary pressures may allow the country’s central bank to further lower interest rates to bolster growth.
China
China’s new president, Xi Jinping, will officially assume office this week as the 12th National People’s Congress draws to a close. Xi and the other newly installed top leadership of the country will inherit stewardship of the world’s second largest economy at a delicate time. Policymakers are seeking to support the country’s still fragile economic recovery without adding to inflationary pressures.
Figures released on Saturday showed that consumer inflation rose 3.2% last month from a year earlier, up from 2.0% in January. The greater than expected jump in inflation was the highest since April 2012.
Most economists believe that the country’s Lunar New Year holiday, which has historically precipitated a spike in food and other prices, probably skewed the numbers upwards and that March’s figures will show price pressures easing. But some economists are still concerned that higher than anticipated inflation could lead to a rates rise later this year. This would be unwelcome news to an economy still recovering from its slowest pace of growth in 13-years.
Last week, Chinese Premier Wen Jiabao set the country’s inflation goal at 3.5% for 2013, down from 4.0% in 2012, and growth target at 7.5%. China’s economy slowed to a 13-year low of 7.8% growth in 2012.
Speaking at Tsinghua University in Beijing last week, Chen Dongqui, deputy chief of the country’s National Development and Reform Commission’s macroeconomic research unit, said officials should aim for 3.0% inflation.
“If we allow the CPI to reach 3.5 per cent or even higher in the late months of this year, it will reduce room for next year’s inflation control,” Chen told the Chinese Economists 50 Forum.
South Africa
The South African Reserve Bank will release fourth quarter current account figures on Tuesday. Market consensus is that the country’s current account deficit narrowed from a record $202.5 billion in the third quarter of 2012 to $200.0 billion in the fourth. Measured relative to the size of South Africa’s overall economy, the current account deficit likely shrank to 6.3% of GDP in the fourth quarter from 6.4% in the third.
Finance minister Pravin Gordhan said two-weeks ago that South Africa’s current account gap last year was likely equal to 6.1% of GDP in 2012, nearly double the 3.1% deficit recorded in 2011. A widening deficit weakens the local currency. Although this makes South African exports more price competitive, it reduces domestic spending power, weighing on household buying, corporate purchases and much-needed infrastructure spending. This constrains growth.
Most economists believe that the current account situation will improve throughout the year and that the country’s exchange rate will gradually strengthen to around R8.60 to the dollar. The rand closed at R9.16 to the dollar on Friday.
On Wednesday, Statistics South Africa (Stats SA) will release January’s retail trade figures. Analysts at 4CAST expect the year on year pace of sales growth to have quickened to 3.2% in January from 2.3% in December.
On Thursday, Stats SA will report January’s wholesale trade, mining, manufacturing and motor trade numbers. Markets expect manufacturing output to have risen 2.8%, year on year, following December’s 2.0% rise.
Finally, on Friday, the South African Revenue Service will release detailed trade statistics for January and the South African Chamber of Commerce and Industry will release its February trade conditions survey.
Matt Quigley is an economist based in South Africa. He previously served as a divisional director at the US Treasury Department’s Office of the Comptroller of the Currency and senior policy analyst at the Federal Reserve Bank of Boston. Matt’s weekly column looks at the economic week-ahead for TBP, providing exclusive insights into developments in BRICS countries. He also represents American, British and Canadian financial and economic data providers on the African continent. He has been a regular contributor to some of Africa’s leading publications, including South Africa’s Mail & Guardian and Nigeria’s Business Day. Matt completed his undergraduate studies at the Johns Hopkins University, postgraduate studies at the University of Pennsylvania and holds an MBA from the University of Cape Town.
