On the production front, February is likely to mark the worst IP growth reading for this year, due to 2012 being a leap year and the continuing weakness of the mining and utilities sectors. According to our calculations, the combined effect of the contraction in electricity and mining production last month implies a YoY IP drop of at least 1.8%. Thus, there could easily have been a decline of more than 2.0%.
As for local demand, despite the latest car sales data (MoM SA rebound), we believe that the overall trend for weak consumer data will remain. The weakness in consumer spending is impacted by banking system trends: retail lending growth edged down in February, while deposit growth got stronger, indicating a higher saving ratio and lower spending ahead. We note that in January, the monthly and annual pace of growth in investment did not coincide, so the data set might be revised. As for February, investment growth is likely to remain subdued, in our view.
Also this week is the weekly CPI, which is likely to mark a moderation in the key growth drivers (gasoline, potatoes and vodka). The inflation statistics are important for the next CBR decision, as a decline in headline CPI would open the way for the regulator to cut base rates. We are reiterating our view that the headline CPI reached its FY13 peak in February and that the CBR will opt to take an easing step already in April.