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BRICS: The week ahead
March 18, 2013, 3:48 am

Over the coming days, Brazil will report current account, foreign investment, job creation and inflation figures. Russia will update on industrial output, retail sales and investment. India and South Africa will announce rates decisions and China’s purchasing managers’ index (PMI) will take centre stage. Here is your guide to the BRICS economies in the week ahead.



Brazil’s data week will begin with formal job creation figures from the country’s labour ministry and weekly consumer inflation data from the Getulio Vargas Foundation (FGV).

Analysts expect the government’s General Register of Employed and Unemployed Persons (CAGED) – a monthly count of formal jobs created in Brazil’s 27 states and federal districts – to show that 95,295 jobs were registered in February, up from 28,900 in January. FGV’s IPC-S gauge – a population weighted measure of price changes in seven major cities – is expected to show a 0.63% rise, up from 0.52% in the prior week.

Two additional inflation indices will follow from the Foundation Institute of Economic Research (Fipe) and FGV on Tuesday.

Analysts at 4CAST expect Fipe’s index to show a 0.15% monthly rise in the cost of living in São Paulo during the four weeks ended mid-March, up from a 0.6% increase during the previous measurement period. They expect FGV’s monthly general price index (IGP-M) – the indicator used for the correction of most contracts and utility prices – to show a 0.30% acceleration during the February 21 to March 20 measurement period, up from 0.15% in January/February.

The week’s final inflation index – the Brazilian Institute of Geography and Statistics (IBGE)’s national consumer price index (IPCA) – will be released on Friday along with February’s current account and foreign investment data.

The IBGE’s IPCA-15 is expected to show that the cost of living in 11 major metropolitan areas rose 0.44%, month on month, during the second half of February and first half of March, down from the 0.68% increase observed during the same period of January and February. Consensus is that Brazil’s current account deficit narrowed to $4.250 billion in February from a record $11.371 billion gap in January. Foreign investment likely fell to $3.621 billion last month from $3.703 billion in January.


Confronting a frustrating combination of rising inflation and slowing growth, Russia’s central bank decided to leave interest rates on hold following its monthly meeting last week. In a statement posted to the bank’s website on Friday, officials pointed to three key indicators as points of concern.

“The dynamics of the key macroeconomic indicators in January 2013 pointed to a continuing slowdown in economic growth. The growth rates of investment in production capacity remained subdued and the retail sales growth decelerated. The industrial output decreased.”

Russia’s Federal Statistics Service will provide updated figures for these measures over the coming days. The agency is scheduled to release February’s industrial output, along with producer price index (PPI) data, on Monday or Tuesday.

Output at Russia’s factories, mines and utilities unexpectedly contracted in January – by 0.8% from a year earlier – for the first time in more than three years. Markets expect that production slowed further in February. Consensus is for a 0.9% year on year decline. PPI data is likely to show that prices at the factory gate rose 4.8% from a year earlier in February, down from 5.1% in January.

February’s investment in productive capacity, retail sales and labour market figures are due for release on Wednesday or Thursday. Markets expect investment growth to have remained subdued and retail sales growth to have decelerated last month, but for the country’s unemployment rate to have dropped slightly.

Consensus expectations are for an anaemic 1.0% year on year growth in investment levels, down from 1.1% growth in January. Retail sales likely grew 3.3% from a year earlier, down from 3.5% in January. And Russia’s unemployment rate probably fell to 5.9% from 6.0%.

Russia’s economy expanded 3.4% last year, down from 4.3% in 2011. Government hopes to achieve growth of at least 5.0% in 2013.


The Reserve Bank of India (RBI) will announce its latest monetary policy decision on Tuesday. Markets will be watching closely to see how Governor Duvvuri Subbarao and his colleagues on the bank’s Monetary Policy Committee (MPC) balance concerns over low growth against worries over mounting price pressures.

India’s economy slowed to 4.5% growth in the three months ended in December, the slowest rate of expansion for Asia’s third largest economy in any quarter in more than 10 years. Looking ahead, the Organisation for Economic Cooperation and Development (OECD)’s Composite Leading Indicator (CLI) – designed to signal turning points in an economy – continues to signal subpar performance for the subcontinent.

In contrast to the United States and Japan, where the CLIs “continue to point to economic growth firming”, and Europe where CLIs – particularly in Germany – point to “a pick-up in growth”, CLIs in China and India point to growth which remains “below trend”, the OECD wrote in its release of this month’s figures.  India’s CLI has been declining since September of last year.

Recognising India’s lacklustre growth prospects, the Reserve Bank reduced the country’s benchmark interest rate by 25 basis points at its January meeting. At the time, slowing inflation figures raised expectations that policymakers were beginning a cycle of growth-boosting interest rate cuts.

Data released last week, however, showed that India’s inflation unexpectedly accelerated for the first time since September last month. The wholesale price index (WPI) – the country’s main measure of prices – rose to 6.84% year on year in February from 6.62% in January.

Despite the acceleration in inflation, most economists expect the RBI’s monetary policy committee to leave the bank’s cash reserve ratio on hold at 4.0%, but to lower the 7.75% repo rate and 6.75% reverse repo rate by 25 basis points each at this week’s meeting.


Flash results for March’s HSBC China manufacturing purchasing managers’ index (PMI) is the big release on China’s calendar this week. The HSBC PMI, compiled by financial information provider Markit, is a closely followed forward looking indicator for the world’s number two economy.

Each month, Markit surveys purchasing executives in over 420 manufacturing companies across multiple areas and sectors in China. Flash results are based on the responses of roughly 90% of total respondents and are generally released 10 days prior to final results.

HSBC’s PMI results for February badly missed consensus expectations for a reading of 52.2, instead dropping to 50.4, just above the 50.0-mark separating expansion from contraction. February’s report contained the lowest composite index reading since the PMI rose into expansion territory in November of last year.

“The final February HSBC manufacturing PMI suggests a slower pace of expansion. But China’s recovery continues on improving domestic demand conditions and the labour market”, Hongbin Qu, chief China economist at HSBC commented at the time.

“The pace of ongoing recovery is mild, implying no need for the [People’s Bank of China] to tighten policy any time soon.”

China’s official PMI – from the China Federation of Logistics and Purchasing (CFLP) and National Bureau of Statistics (NBS) – also dropped in February, to 50.1 from 50.4 in January.

Despite the disappointing readings from both measures, most analysts have urged caution in reading too much into last month’s figures. The week-long Chinese New Year celebrations in February, many argue, skewed results and seasonal adjustment of the indices did not sufficiently account for the distortions.

These economists believe that the pace of China’s recovery remains modest but on-track. Nevertheless, with indices sitting right above the contraction line, economists and investors will be watching this week’s number even more closely than usual.

South Africa

Consumer inflation figures and a rates decision from the country’s central bank are the two big items on South Africa’s economic calendar this week. Statistics South Africa (Stats SA) will release last month’s consumer inflation figures on Tuesday, a day before the South African Reserve Bank (SARB)’s Monetary Policy Committee (MPC) announces this month’s rates decision.

Inflation eased to 5.4% in January from an average 5.6% in 2012, but is widely expected to have picked back up to 5.6% in February. SARB expects inflation to breach the upper-limit of its 3.0% to 6.0% target range in the third quarter of this year, constraining officials from lowering rates in a bid to bolster growth.

“The relatively subdued growth outlook [in South Africa] and the negative output gap have meant that we have been more tolerant of inflation at the upper end of the target range,” Reserve Bank Governor Gill Marcus said earlier this month.

“However, [the Reserve Bank’s] room for further accommodation is constrained by the need to keep inflation within the target over a reasonable time horizon.”

A depreciating local currency, which makes imported goods more expensive, may further add to the inflationary pressures facing Africa’s largest economy. The rand closed at R9.18 to the dollar on Friday, close to a four-year low.

Against that backdrop, markets do not expect the MPC, whose primary mandate is price stability, to make changes to the central bank’s 5.0% repo rate at their meeting this week. Officials last cut rates by 50-basis points in July 2012.

In addition to Wednesday’s CPI figures, Stats SA will release January’s tourism accommodation, transport and food and beverage figures on Monday. January’s civil cases for debt and building statistics will follow on Tuesday along with quarterly employment statistics for the fourth quarter of last year.

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