News
CZ: Negative – Nationwide public transport strike (p2)
PL: Dovish – May Wages growth decelerates to 4 % yoy (p2)
TK: Neutral – May Consumer Confidence Index weakens 0.6% (p2)
Today’s Events
HU: April Wages / KZ: KZT 10bn 2016 GB auction / PL: May IP; May PPI / RU: Money Supply as of June, 13
EEMEA Markets
CEE local markets were hit hard yday by the escalating Greek crisis with all major currencies depreciating (RON underperformed while the CZK outperformed). At this stage the most obvious contagion channel looks like the risk appetite and the banking sector links. From this perspective the Balkan economies are most at risk, with heavy Greek bank exposure. For Romanian we believe the key question at this stage if and when the authorities start converting the EUR1.5bn proceeds they received from the Eurobond sale. We remain structurally positive on Romania but look for signs of NBR presence on the market. Otherwise as market sentiment remains poor most probably till July we maintain our recent call to overweight CZGBs versus other countries in the region as a defensive trade.
Meanwhile Polish data provide mixed signals following the CPI shock: May saw wage growth rates fall from 5.9% yoy in April to around 4% yoy (well below the market consensus), which is similar to the results from the previous months. The sharp drop in the average wage in monthly terms (3.2% mom – much deeper than the average seasonal pattern) implies that the April jump in wage dynamics was a one-off phenomenon, related primarily to high bonus payments in the mining sector and partially also in the manufacturing sector. Nevertheless, the coming months may bring another, this time, more sustained surge in wage growth rates due to the increasing pressure for pay rises in large companies by unions fueled by mounting inflation expectations (increase in inflation to 5% yoy in May will be reflected in further increase in household inflation expectations). Employment numbers stabilized in the corporate sector in May (0.0% mom), which translated into a decline in the annual growth rate to 3.6% yoy from 3.9% yoy in April. The slower pace of employment growth is related to the pronounced decline in the growth of export orders in the manufacturing sector. However, during the rest of the year external demand should gradually be substituted by domestic demand (both consumption and slowly reviving private investment) as the main stimulus for employment growth, which should prevent a deeper breakdown of employment growth. May data from the labor market saw the real wage bill growth rate tumble to 2.8% yoy from 5.2% yoy in April. Yesterday’s surprisingly weak labor market data support the scenario of no rate hike at the next MPC meeting. We expect that a possible continuation of monetary tightening may take place no sooner than in the autumn.
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Gyula Toth
UniCredit Research