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Macro week ahead – inflation in Russia moderates, early indicators point downwards

This week is relatively light on market-moving data releases across our CEEMEA universe, with the CPI report from Russia taking centre stage.

Rosstat is to release its July inflation numbers early this week, with the headline number expected at 7.5% YoY (its first decline since the start of the year). The slower indexation of regulated tariffs this year was the main disinflationary driver in July, while food inflation is likely to have picked up even higher and core remained stable as the impact from a weaker currency dissipates. Looking ahead, however, the raft of food import bans suggested recently poses risks to the pace of disinflation over the coming quarters and we have put our short-term inflation forecast under review.

Slower inflation might also prove to be the only benign statistical news from Russia this week as, judging by the recent rail cargo handling numbers, early indicators are likely to leave a rather depressing aftertaste, the latest one-off uptick in PMI manufacturing notwithstanding.

Elsewhere in our CEEMEA universe, fresh reports on industrial production and retail sales from the Czech Republic and Hungary are likely to be a guide as to the strength of the recovery in the region. We expect fairly robust numbers, particularly as regards domestic demand, with a loose policy mix and improving labour markets being the main tailwinds. Any escalation in Russia-Ukraine tensions is unlikely to have a substantial effect on these two economies at the current stage, with retaliatory sanctions from Russia likely posing more downside risk to Poland, we believe (the recent dichotomy in PMIs might be a relevant read-across).

Daria Isakova, Vladimir Kolychev
VTB Capital analyst

inflation, Russia

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