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BRICS: The week ahead
March 4, 2013, 10:19 am

The week ahead is comparatively quiet in India and South Africa, but a rates decision in Brazil, consumer inflation readings from Russia and a slew of data from China – the world’s second largest economy – will give BRICS watchers plenty to analyse over the coming days. 


Brazil’s economic week will begin on Monday with consumer inflation figures from the Fundação Instituto de Pesquisas Econômicas (Fipe). Fipe’s consumer price index (CPI) measures monthly price changes in São Paulo, Brazil’s largest metropolitan area. Markets expect the gauge to show a 0.33% monthly rise for February, down from January’s 1.15% increase.

Two additional inflation measures and a central bank decision will follow on Wednesday. The Fundação Getulio Vargas (FGV)’s general price index (IGP-DI) is a weighted measure of wholesale (60%), consumer (30%) and construction costs (10%). Analysts at 4CAST anticipate a deceleration to 0.25% monthly price growth in February from 0.31% in January. The central bank’s commodity price index is also expected to ease, to 7.8% year on year growth in February from 8.3% in January.

Brazil’s central bank is widely expected to leave the bank’s benchmark SELIC rate on hold at 7.25% at this month’s meeting. The median estimate among economists surveyed by the central bank last week is that rates will remain unchanged through the end of the year.

On Thursday, attention will shift to the Instituto Brasiliero de Geografia e Estatística (IBGE)’s January industrial production figures. Consensus is for a 1.5% monthly uptick in production after December’s flat reading. President Dilma Rousseff’s administration considers boosting industrial output a key policy aim and has recently cut taxes and levies, kept borrowing costs at record low levels and reduced electricity costs for manufacturers to boost output.

Brazil’s data week will close on Friday with three additional inflation measures. FGV’s weekly CPI is expected to show a slight increase, but FGV’s preview inflation gauge and the IBGE’s national index of consumer prices (IPCA) – the rate used by the central bank in setting monetary policy – are both expected to show slight declines. This would be welcome news to policymakers.


On Tuesday, HSBC and Markit Economics will release Russia’s services purchasing managers’ index (PMI) readings. The country’s services sector grew for a sixth straight month in January and is likely to show another healthy result this week. The index stood at 55.7 in February, well above the 50.0 mark separating expansion from contraction.

February’s consumer price index (CPI) data is also expected on Tuesday or Wednesday. Consensus is that consumer inflation accelerated slightly last month, to 7.3% year on year growth from 7.1% growth in January. On a monthly basis, however, the index likely slowed to 0.6% monthly growth in February from 1.0% growth during the first month of 2013.

Stubborn inflation has proved problematic for policymakers as they attempt to balance concerns over price pressures against those about the country’s lacklustre growth. But the deputy chairman of Russia’s central bank, Alexei Ulyukayev, said earlier this month that inflation was close to peak levels and will probably slow to within the bank’s target range of 5.0% to 6.0% during the second quarter of 2013.

Until inflation eases, policymakers are unlikely to heed calls from government, business and consumers to loosen their rates stance, a move they last made in December 2011. In testimony to the upper house of Russia’s parliament last month, Bank Rossii’s chairman Sergai Ignatyev – who is retiring in June – said that, “The key task of monetary policy is to maintain a low and stable inflation rate.”

Given that unambiguous stance, the bank is widely expected to leave its benchmark rate on hold at 8.25% at this month’s policy meeting. Officials will announce their decision this week or next.

Russia’s economy slowed to 3.4% growth in 2012 from 4.3% in 2011. The International Monetary Fund (IMF) expects the country’s economy to expand by around 3.75% this year.


Falling in between last week’s budget presentation – in which finance minister Palaniappan Chidambaram said that India’s fiscal deficit will be reduced to 4.8 per cent of GDP this fiscal year – and a rates decision by the central bank later this month, this week will be a comparatively quiet one for Indian markets.

Only two significant data releases are on the country’s unusually sparse economic calendar over the coming days. HSBC and Markit will release services sector purchasing managers’ index (PMI) readings for February on Tuesday. The central bank’s latest money supply data will follow on Wednesday.

India’s services sector, which accounts for roughly 57.0% of the country’s gross domestic product, expanded at the fastest pace in a year in January. The services PMI rose to 57.5 from 55.6 in December, HSBC and Markit Economics reported. Markets are hoping for more good news this week.

A positive reading would complement the strong showing of the country’s manufacturing PMI last week. Figures released on Friday showed that the country’s manufacturing PMI rose to a reading of 54.2 in February from 53.2 in January.

Taken together, the two forward-looking measures of economic activity are an indicator that India will be able to improve on the disappointing 4.5% expansion it experienced in the three months ended in December. The fourth quarter of 2012 marked the weakest performance of Asia’s third largest economy in almost four years.

Many are hoping that the Reserve Bank of India (RBI) may provide a further boost to the economy by cutting rates later this month. The RBI cut the repurchase rate by 25 basis points in January, the first reduction in nine months. Minister Chidambaram said on Sunday that “if policy rates are reduced” it will help India to achieve the 6.5% growth that government has targeted for the 2013/14 fiscal year.


China will release February’s trade figures on Friday. Analysts always pay close attention to import, export and trade balance numbers – considered to be one of the most reliable of the country’s economic indicators – but will be scrutinising this week’s release particularly closely.

China’s General Administration of Customs reported last month that, when compared with a year earlier, imports surged 28.8% to $158.2 billion in January. Export levels expanded by 25.0% to $187.4 billion, raising the country’s trade surplus to $29.2 billion for the month.

But Customs also reported that, due to the timing of the country’s Lunar New Year celebration, there were five more working days in January 2012 than in January 2011. After adjusting for this, officials said that exports likely grew by 12.4%, year on year, and that imports increased by just 3.4%, in January of this year.

In 2013, China’s Spring Festival fell in February. As a result, most economists will be looking at January and February’s combined figures to get a more accurate picture of annual growth than they would by looking at either month’s data in isolation. Consensus is that exports likely grew 7.6%, year on year, and that imports fell 8.2% last month. The country’s trade balance is expected to swing from a $29.2 billion surplus to an $8.9 billion deficit.

On Saturday, China will release last month’s consumer price index (CPI) and producer price index (PPI) readings along with industrial production, retail sales and urban fixed investment figures.

On an annual basis, markets expect consumer inflation to have accelerated to 3.0% growth and prices at the factory gate to have fallen 1.5%. Industrial production figures are forecast to show a 10.3% year on year rise. Retail sales likely picked up to 15.5% year on year growth and investment probably remained flat at 20.6% year on year growth.

South Africa

On Monday, South Africa’s government will release February’s provisional National Treasury figures and the National Association of Automobile Manufacturers of South Africa (Naamsa) will release last month’s vehicle sales figures. In comments on January’s vehicle numbers, Naamsa highlighted a largely positive outlook for the industry.

“Despite indications of slower growth in the economy, the performance of the South African automotive sector continued to surprise on the upside. The overall near term outlook for the automotive sector remained reasonably positive,” the group said.

On Tuesday, the country’s statistics agency – Statistics South Africa (Stats SA) – will release January’s producer price index (PPI) and Contract Price Adjustment Provisions Work Group Indices (CPAP), used by the construction index to escalate multiyear contracts. This week’s PPI release will be the first to feature industry-specific sub-indices, covering agriculture, mining, electricity and water and manufacturing. The PPI for manufactured goods will be considered the “headline” index, but no aggregate measure of price changes will be reported.

Stats SA’s decision to abandon an aggregate producer inflation measure has caused concern in some quarters. Firms that previously used the aggregate PPI for contract price adjustment will now need to switch to a relevant sub-index.

On Thursday, the South African Reserve Bank will report last month’s statement of assets and liabilities, including its gold and foreign exchange holdings. Analysts expect the central bank to report gross reserves of $50.4-billion, down from $51.2 billion in January. The Bureau for Economic Research (BER) at the University of Stellenbosch will also release its first quarter business confidence index on Thursday.

Finally, on Friday, the BER will release its building confidence readings for the first quarter of 2013. Absa will release its February housing price index and the South African Chamber of Commerce and Industry (SACCI) will report its February business confidence index.

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