“We believe the trend will be for a slowdown in inflation in upcoming inflation releases,” says Credit Suisse’s Nilson Teixeira on Brazil. Wholesale agricultural prices contributed strongly to a rise in Brazil’s core inflation in September. The IGP-10 index increased from 2.1% in August to 3.2% in September. However wholesale industrial prices posted lower inflation this month, as the upward trend in fuel and mineral prices cools.
“We expect the shocks currently impacting the agricultural component to lose strength and industrial inflation to remain at low levels.” Brazil’s domestic fixed-rate debt rose slightly in August, as did the percentage of fixed-rate to floating securities.
Jon Harrison, Dresdner Kleinwort’s emerging markets strategist, notes that Polish prices are heading up along with Hungary, Slovakia and the Czech Republic, but that the market is pricing in future rate hikes in Poland only, as inflation in other countries was already anticipated. “After the recent increase in rate hike expectations in Czech Republic it is Poland that now stands out as the country where the market believes that rates will be increased least in the coming months.
“It is difficult to be very enthusiastic about Taiwan’s macro prospects over the coming 12 months,” says Credit Suisse’s Joseph Tan, “given the ongoing political uncertainty and limited economic potential.” While pressure on Taiwan president Chen Shui-bian to resign will likely continue to build over the rest of the year, there is a “distinct lack of clarity” about the timing of a resolution.
Gridlock within parliament rules out policy measures to counter sluggish domestic demand or moderating export growth. Still, even a moderate export expansion is sufficient to keep the overall economy above water. Growth should not fall below 3% over the next six quarters, though this is the lowest in Non-Japan Asia.
Don Eggington at the Daiwa Insitute of Research argues that year-on-year figures are a better estimate of growth in South Africa than monthly figures. Year-on-year data shows a slight decline in South Africa’s growth over the second quarter this year from 4.2% to 4.1%, while monthly figures show an increase from 4% to 4.9%. “Our view is that the year on year figures are a better estimate of the underlying growth rate and that GDP growth remained robust in spite of the financial markets volatility in the second quarter.”