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Macro week ahead


The dominant theme this week is the central bank decisions in Turkey and South Africa. In Russia, Rosstat is due to release its monthly package of economic statistics for June as well as the regular weekly CPI numbers. Otherwise, the focus will be on Poland, where the CPI report for June will be out.

Mid-July is likely to see rather intense news flow across the CEEMEA region. In Turkey, the CBRT might continue the easing cycle as the internal rebalancing and subsequent improving current account and benign core inflation speak well for lowering the weekly repo rate. The Bank might also give an indication for further rate cuts. In the medium term, the key rate will likely hit at least 8%, in our view.

In South Africa, the market is pricing a 25bp hike, justifying it with rising inflation that posted a five-year high of 6.8% YoY in May. On the other hand, elevated uncertainty over the near-term growth outlook, as well as sub-6% core inflation, might provide comfort for the regulator to maintain the status quo and delay any rate hike for autumn.

In Russia, the end of 2Q14 likely saw the manufacturing upturn tapering out as the impact from one-offs and inventory build-up dissipates. That said, any slowdown is likely to prove measured given the continued support from import substitution. On the demand side, discretionary consumer spending is likely to have moderated further in June as flagged by a whopping 17% drop in car sales and persistent drag from slowing incomes and consumer credit. In the meantime, investment demand has likely continued to muddle through in the negative area, still at the mercy of two opposing cross currents, whereby elevated policy uncertainty and tight access to credit pushes the private sector to cut capex and deleverage while budget- and SOE-funded investments might be picking up. That said, 2Q14 overall might have been better than we expected as the Russian economy continued to grow.

Vladimir Kolychev, Daria Isakova
VTB Capital analyst


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