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Macro week ahead


The key news in Russia this week is the March early indicators, including PMIs, railway cargo turnover and electricity output. Also making the news are GDP and the secondary estimate of the BoP prints for 4Q14 in the latter part of this week, as well as the regular CPI weekly report on Wednesday.

In CEMEEA, the GDP figures for 4Q14 will be available on Monday while the set of PMIs are due on Wednesday and in Turkey the CPI is set to be published on Friday.

After a week-long lull on the data front, we expect early indicators to bring more details about the speed and depth of the internal adjustment. The PMI prints for services and manufacturing are likely once again to underscore the tradables vs. non-tradables dichotomy which is characteristic of the current recession. We expect the manufacturing-services PMI gap to widen further, with manufacturing PMI edging higher to just below the 50 threshold while the services PMI is to stay roughly level. Another dichotomy of the current economic situation is faltering demand versus resilient supply. It could be supported by the electricity print which, according to the available daily statistics, could deliver a headline figure in the 0.6-0.7% YoY range for March. Meanwhile, the railway cargo turnover is expected to deliver another weak print, which we estimate at -1.0% YoY. The bulk of the drag is again from the non-tradables side (construction-related cargo), while we see other components delivering positive contributions.

We see no significant surprises from the update on the 4Q14 BoP statistics as they are likely to come close to the already available preliminary print. We expect the correction to stem from the amount of physical currency purchases by households as the preliminary print (USD 18.2bn) does not line up well with the monthly statistics (USD 12.0bn), pointing to a lower actual figure.

Another refinement of the past data is to come from GDP, as the 4Q14 reading is out. Available yearly data and other statistics point to a near zero print in a range from -0.2% to 0.1% YoY. This is not particularly material to our projections or in terms of policy, but it will probably have an effect on the generally accepted timing of the start of the current recession.

Vladimir Kolychev, Alexandr Isakov
VTB Capital analysts

Russia, PMI

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