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Forecasts and market analysis based on price assessments from Fastmarkets MB and Fastmarkets AMM

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June 2017 | World Economics


World Economics Monthly - Emerging Economies

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Chinese manufacturing activity slows...
The Caixin Manufacturing PMI for China declined from 50.3 to an 11-month low of 49.6 between April and May, signalling the first contraction in manufacturing activity since June 2016. This is reflected in the fact that the annual rate of growth in producer prices, which peaked at 7.8% in February, slowed for the third month in a row during May, to 5.5%.

... as deleveraging weighs on investment growth
Sluggish manufacturing is largely due to slowing investment growth. Having accelerated from 8.1% to 9.2% between December and March, the annual rate of growth in fixed asset investment declined for second month in a row during May, to 8.6%. This in turn reflects a deceleration in money supply growth, with the annual rate of growth in the M2 measure slowing from 11.1% to a more-than-20-year low of 9.6% between February and May.

Russian retail sales expand for the first time in more than two years...
Having declined for 28 consecutive months between January 2015 (after a plunge in the foreign-exchange value of the rouble initiated a spike in consumer price inflation) and March 2017, retail sales in Russia returned to growth during April, with the annual rate of growth accelerating to 0.7% in May. New car sales rose by 14.7% y-o-y and 5.1% year-to-date during May. Higher domestic demand is driving an increase in industrial production, with the annual rate of growth accelerating sharply between April and May, from 2.3% to a five-year high of 5.6%.

...as price stabilisation enables additional monetary easing
Having decelerated for ten months in a row, the annual rate of consumer price inflation stabilised at 4.1% between April and May. As a result, the Central Bank of Russia reduced its benchmark interest rate by 25 basis points at its June meeting, to 9.0%, bringing to 100 basis points the cumulative reduction in rates this year to date.

Demonitisation weighs on Indian GDP growth...
The annual rate of GDP growth in India decelerated significantly between Q4 2016 and Q1 2017, from 7.0% to 6.1%. This represented the fourth consecutive quarter of slowing growth and the slowest rate of growth since late 2014. This slowdown is largely attributable to the impact of the ban on Rs1,000 and Rs500 denomination notes (so-called demonitisation) that was introduced late last year.

...as inflationary pressure eases
Wholesale price inflation continues to weaken, with the annual rate decelerating for the third successive month, from 6.0% to a five-month low of 2.2% between March and May. Food prices were particularly weak. This has led to increased pressure on the Reserve Bank of India to ease monetary policy. However, the bank is waiting to assess the impact of the introduction of a Goods & Services Tax in July. Moreover, as India enters the crucial monsoon season, any deficit in the amount of rainfall could quickly send the cost food soaring.

Brazil likely to exit long recession during Q2...
Brazilian GDP contracted at its slowest annual rate in more than two years during Q1 2017, declining by 0.4%. This compared with a decrease of 2.5% in the previous quarter. As a result, the country is now close to exiting a recession that has lasted for three years. Although industrial production plunged 4.5% y-o-y during April, the Markit Brazil Manufacturing PMI rose from 50.1 to 52.0 between April and May, its highest reading in more than four years. Moreover, car production soared 33.8% during the latter month, to 237,1000 units.

...as slight improvement in labour market boosts retail sales
With economic activity reviving, the rate of unemployment in Brazil declined (albeit marginally) for the first time since late 2014 during April, from 13.7% in March to 13.6%. With inflationary pressure continuing to ease (consumer prices rose by 3.6% y-o-y in May, down from 9.0% as recently as August 2016), retail sales rose for the first time in two years during April, increasing by 1.9%. 

Russia Retail Sales

China Urban Fixed-Asset Investment

Indian GDP Growth