Mid-June, the CEEMEA agenda is massively populated with top-tier news flow from Russia.
Along with rising inflation (7.7% vs. 5.0% +/-1.5pp target) more and more economists were starting to consider a hike a possible decision at the forthcoming CBR monetary policy meeting. We also cannot cross out further tightening, given the rationale behind the previous hike; however, we do not expect any changes in rates and see preserved hawkish rhetoric with the focus on favourable inflation dynamics ahead and no substantial upside risks for medium-term inflation.
While the monetary authorities will likely keep ignoring the deteriorating economic picture in Russia, May’s data pack will likely bring another round of issues of concern. Among the most interesting, we believe that factors that fuelled the manufacturing pick-up in February-April might have proved to be temporary in May with oil refining output in particular starting to normalise and demand for construction-related materials markedly weakening (see our Early Indicators for more colour, of 5 June). As for local demand, the heightened cost of funding curtails investments and cooling income growth coupled with a loosening labour market (we stick to the view that the puzzling decline in the unemployment rate at the beginning of the year is likely to have been pared last month) weighs on consumers.
On the inflation front, the weekly data point might show an advance to 7.8% YoY and some normalisation in chicken prices growth.