News
HU: Negative – Alliance of Hungarian Local Government Head announces a proposed delay of principal repayments on CHF loans issued by local governments to domestic instititions, largely banks (p2)
RO: Neutral – NBR leaves policy rate unchanged at 6.25% / Negative – June retail sales drop 1.2% mom (p2)
TK: Mixed – July CPI comes in at 6.7% yoy, PPI – at 10.3% yoy (p2)
Today’s Events
CZ: Policy rate announcement, June Retail sales, CZK8bn 12M tbill auction / HU: HUF 50bn 12M and HUF7bn Dec-2015 HUNGB auctions, Budget lvl YTD / RO: June Wages, RON 700mn 2016 RONGB auction / RU: July CPI, (04-05) CBR rates decision / TK: CBT extraordinary meeting
EEMEA Markets
Russia: Growth moderation, inflation moderation: Wednesday saw Russia print its lowest composite PMI reading since Sep-10. At 0.25 standard deviations below its long term average, Russia’s composite PMI fell to 51.9. The decline was largely the result of an 0.8pp decline in the manufacturing PMI, translating into a decline of 5.4 points since March. As has been the case in recent months, the services PMI was much more stable, showing a decline of 0.1 points in July. It is currently 0.2 points below its long term average, having failed to recovery to levels above its long term average since the 2008 crisis. At 51.9 in July the composite PMI is 0.6 points below its Q2 average. Its Q2 average of 52.5 points to a healthy QoQ gain in GDP in Q2 of approximately 1.0%.
Wednesday’s news on the activity front was accompanied by further evidence of a decline in inflation pressure. Over the week to 1 August, Russia CPI declined 0.1pp, its first weekly decline in 2 years. Much as was the case with Turkey’s downward surprise on inflation in July, it was largely attributable to food prices. That said there are a variety of other factors which also point to an easing of inflation pressures. In seasonally adjusted MoM terms, PPI inflation has eased significantly. Over the 4 months to June, PPI declined by 0.2pp. The latest PMI readings for input and output prices showed a small increase but remain either below or in line with their long term average. As we entered this year they were notably above their long term average. Meanwhile money supply growth has eased. Seasonally adjusted M0 has declined in each of the 4 months to June. On a 3 month seasonally adjusted and annualised basis, M2 growth is at its lowest since May-09. As we have noted in the past inflation looks set to ease in YoY terms over the coming 1-2 quarters while the CBR is likely to leave its policy rate on hold this week.
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Gillian Edgeworth
UniCredit Research