News
ES: Positive -International trade posts strong growth in May (p2)
KZ: Positive – According to PM K. Masimov, Kazakhstan’s economy grew 7.1% yoy in 1H11 (p2)
RO: Positive – May external trade data show both exports and imports accelerating to 32% YTD and 23.2% YTD respectively (p2)
Today’s Events
BG: June CPI / HU: June CPI / SRB: June CPI, RSD10bn 18M t-bill auction / SK: June CPI, May Ind Orders / UA: May Trade balance
EEMEA Markets
In Turkey it is difficult to find many positives in the May BoP data released yesterday. The C/A deficit at USD 7.8bn was in line with expectations but 2.6x that of May-10. On a 3M seasonally adjusted and annualised basis, the C/A deficit was broadly unchanged at almost 12% of GDP. Financing remains dominated by short term inflows (USD 3.5bn) with long term inflows standing at a more muted USD 1.7bn. Within short term inflows, bank loans dominated at USD 2.6bn while portfolio flows were negative for the first month this year (-USD 0.8bn). Compared with the volume of short term inflows, banks borrowed USD 0.5bn of long term funds while FDI stood at USD 0.9bn. Examining data available to date for June on credit and fiscal performance, the picture looks a bit better. Over the past 3 weeks credit growth wow averaged 0.2%, compared with average wow growth of 0.7% YTD. Given the extent of upside surprises YTD in Turkey on credit growth, 2-3 weeks of improved data is not enough to establish a firm trend but is at least a move in the right direction. That the budget deficit over 1H is down 88.5% to TRY 2.3bn is also encouraging (though it can also be argued that it should be even tighter). Revenue growth was strong but expenditure growth is also contained at 6.9% yoy. All in all a mixed bag of data but with June credit and fiscal data a bit more positive than the May BoP release. Next up is unemployment on Friday, followed by the CBT’s rate decision on the 21st. In the meantime we monitor weekly credit data.
In Russia Deputy Governor Ulyukayev stated on Monday that cumulative inflation over July-September may reach only 0.5%. This would imply a decline in inflation to 7.7% YoY from 9.3% YoY in June. Once again food prices are at play in the region. This is particularly the case in Russia given that last year’s harvest was very poor. In June food price inflation stood at 12.5%, contributing 4.8pp to YoY inflation. We expect further declines in the month ahead, playing a key role in lower headline inflation. This bodes well not only for inflation but also for private consumption. YTD the consumer has had to weather a hike in social security contributions as well as elevated inflation. Growth in real disposable income has turned negative as a result, significantly constraining the consumer. Looking ahead to the second half of the year, lower inflation should support growth in real private consumption and overall economic activity. In Turkey inflation and domestic demand dynamics should be in sharp contrast.
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Gillian Edgeworth
UniCredit Research