EUR/USD parity | July 15th 2022

The Euro continued to weaken against the US dollar and the currency pair reached parity on Thursday, July 14th, reflected in the daily data provided by the European Central Bank (ECB). This is the lowest level in 20 years. For a brief moment on July 14th, the FX rate fell even below 1 US dollar per Euro. The war in Ukraine and the sanctions against Russia are deepening the energy crisis in Europe, increasing the concerns for economic recovery. Further, the Fed in the US and the ECB in the Euro Area are at different stages in the monetary policy tightening aimed to tame inflation. The ECB will start raising key interest rates on July 21st, while the Fed started hiking in March 2022. The end ECB's quantitative easing programme coupled with higher borrowing costs, essentially the end of the cheap money era, might put the breaks on the economic recovery in the Euro Area.

The markets in Brazil forecast a 7.67% y/y inflation for 2022 | July 12th 2022

The markets in Brazil expect consumer inflation will moderate to 7.67% in 2022, according to the July 8 edition of the Focus Survey, conducted by the Brazilian central bank among 140 entities, including financial institutions, consultancies and brokers. One month earlier, the markets expectations were 8.5%.

Brazil's inflation stood at 11.89% y/y in June, and it has been above 10% y/y since October 2021. Higher prices of food and fuels have supported the overall index, reflecting higher international prices of oil and fertilisers. Consequently, the central bank has raised the benchmark Selic rate eleven times in a row since March 2021. At its last meeting on June 15, the central bank set the Selic rate at 13.25%.

India's current account balance narrows to 1.5% of GDP in Q1 2022 | July 11th 2022

India’s current account balance (CAB) recorded a deficit of USD 13.4bn in Q1 2022 or Q4 FY2022. While the deficit narrowed to 1.5, as a percentage of GDP in Q1 2022, from 2.7 in the previous quarter, the current account balance for the whole fiscal year ran into a deficit of 1.1% of GDP, as opposed to a positive balance of 1.2% in FY2021. The improvement has been driven by steady exports, which can be seen in the moderation of current account pertaining to goods and services, to USD 26.2bn over the January-March quarter of 2022, from USD 31.9bn in the previous quarter.

Consumer Inflation in Turkey  | July 8th 2022

The Turkish population has been experiencing higher inflation during the last couple of years in the light of the currency's weakening, but the supply chain disruptions and the war in Ukraine pushed global commodity prices even higher. Consumer inflation in Turkey stayed in the double digits since the end of 2019, swinging between 10 and 20%, but in 2022 it began to skyrocket, reaching 78.6% y/y in June. This is reflected in the credit and debit card data from the Central Bank, and specifically in the value of the transactions at petrol stations, which started increasing this year. The transaction count, on the other hand, stays rather stable.

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Russia Retail Trade Turnover | June 30th 2022

Retail sales in Russia declined sharply for the second consecutive month in May 2022. Retail trade turnover dropped by 10.1% y/y, after decreasing by 9.8% in April. Retail sales of food products declined by 1.8% y/y, while sales of non-food products plummeted by 17.2% y/y, the sharpest since the first wave of COVID-19 in 2020. The fall in retail trade in Russia came as a result of the Western sanctions on Russia which have driven up inflation and decreased the purchasing power of Russian consumers.

Brazil's Imports of Fertilisers from Russia Jumped by 78% y/y in May | June 14th 2022

In spite of international sanctions agains Russia due to the war with Ukraine, Brazil's imports of fertilisers from the Eurasian country rose by 78% y/y in May 2022, reaching around 1.1mn tonnes in the month. In value terms, Brazil's imports of fertilisers rose by 277.8% y/y to USD 3.1bn in the fifth month of 2022, reflecting the higher prices of the product. Fertilisers are a fundamental input for Brazil's agriculture, and according to the Brazilian federal government, imports from the Russian Federation will guarantee the 2022-23 harvest of the Latin American country.

In May 2022, Russia accounted for 28% of Brazil's imports of fertilisers. The Brazilian government is negotiating with other producing countries, such as Canada, Jordan, Egypt and Morocco, to be less dependent on the Russian supply of the input.

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India's INR/USD exchange rate continues to depreciate | May 24th 2022

The INR/USD exchange rate continued to depreciate until May 17, touching a record high of 77.65 against the USD. In April 2022, it suffered a depreciation of 0.8% m/m, which is likely to continue as India bears the impact of the continued war in Ukraine. India’s widening current account deficit, driven by the elevated crude oil prices globally, has asserted an upward pressure on the currency. This was exacerbated by the global monetary tightening in many advanced markets such as the US, and even emerging markets such as Brazil, which have led to capital outflows from the country. India too, joined the monetary tightening group on May 4, 2022, as the monetary policy committee under the Reserve Bank of India hiked the repo rate by 40 basis points to 4.4% p.a. The foreign exchange reserves held by the Reserve Bank of India has supported the central bank in stabilizing the INR against unprecedented depreciation, but the reserves have declined to USD 600bn on April 22, from USD 617.6bn at the end of March.

Price expectations of Russian enterprises | May 23rd 2022

Price expectations of Russian enterprises moderated in April 2022. The 3 month inflation outlook dropped to 23.3% from 32.6% in March and the record high 41.8% in February, signalling that inflationary pressures in Russia have moderated, after the shock in the immediate aftermath of the invasion of Ukraine.

Ukraine: Merchandise Exports Distribution | May 10th 2022

Over 43% of Ukraine's merchandise exports were manufactured goods, occupying the biggest share, followed by food with 40.5% share, according to data by the World Bank. Food exports have grown substantially during the last 10 years. In 2011 for example their share was 18.8%. According to the latest an April 20200 FAO report, in 2021, wheat exports by Russia and Ukraine combined accounted for about 30 percent of the global market. For the sunflower oil this combined share is even larger (55%). 

Unemployment Rate in Russia | May 4th 2022

Unemployment in Russia remained unchanged in March 2022, staying at a record-low of 4.1%, despite the mass exodus of foreign companies as a result of the wide ranging sanctions following the Russian invasion of Ukraine. However, most workers in foreign companies have been furloughed so they are not registered as unemployed for the time being. According to the IMF, unemployment in Russia might reach 9.3% by the end of the year.

Brazil's Fuel Prices Jump in March | May 2nd 2022

The skyrocketing oil prices caused by the war have increased fuel prices in Brazil. The national average gasoline price reached a record high of BRL 7 per litre in March, compared to BRL 6.6 in February and BRL 5.48 in March 2021. Prices of diesel and compressed natural gas also registered record highs in the third month of 2022, of BRL 6.29 per litre and BRL 4.73 per cubic metre, respectively. In addition, prices of ethanol stood at BRL 4.8, a 19.9% y/y increase, reflecting the lower harvest of sugarcane in 2021 following adverse weather conditions.

Fuel prices were the main contributors to the 1.6 m/m increase in Brazil's consumer inflation rate in March. The subindex of transportation rose by a seasonally adjusted 3% m/m, supported by a 6.7% m/m jump in consumer fuel prices. The annual consumer inflation in the country recorded 11.3% y/y in March, compared to 10.54% y/y in February.

Euro Area Imports from Russia | April 26th 2022

The Euro Area imported goods worth EUR 16.23bn from Russia in February, Eurostat data shows. This is a record high and 111.7% more than the same month in 2021. This makes Russia the third-largest import partner of the currency block in that month. The value of imports from Russia has been following a steep upward path ever since the spring of 2020. The annual change rate, on the other hand, stays between 80% y/y and 140% y/y since April 2021.

Economic expectations for Germany | April 19th 2022

Germany's financial markets' experts stay pessimistic in April in terms of the economic outlook. The economic expectations indicator published by the Centre for European Economic Research (ZEW) in Mannheim declined further following the plunge in March due to the Russian military invasion in Ukraine and the subsequent sanctions imposed on Russia. The index reached -41% in April compared to -39.3% in the previous month. The current situation indicator also declined but not as fast and not to such a low level. It fell to -30.8% compared to -21.4% in March. The data breakdown of the expectations index reveals that a bigger share of the respondents expect no change (29.4% in April compared to 21.5% in March), while the shares of both optimists and pessimists have shrunk. The ZEW Indicator is constructed as the difference between the percentage share of analysts who are optimistic and the share of analysts who are pessimistic about the German economy. The participants in the survey are up to 350 financial market experts.

Brazil's Food-At-Home Inflation Jumps During the War | April 19th 2022

Brazil's food-at-home inflation sub-index rose by 3.6pp to 13.7% y/y in March, reflecting higher prices of fertilizers and fuels amid the Russia-Ukraine war. Notably, prices of tubers, roots, and vegetables rose by 55.9% y/y in March, supported by higher prices of carrots (+166.2% y/y), tomatoes (+94.6% y/y), and soybean oil (+23.8% y/y). In addition, prices of bottled gas - widely used for cooking - rose by 29.6% y/y. The overall consumer inflation in Brazil stood at 11.3% y/y in March, compared to 10.54% y/y in the previous month.

Crude Oil Price Russia against Saudi Arabia | April 11th 2022

While Saudi Arabia has long been the largest oil importer to China, in the past decade Russia has been catching up quickly, with crude oil exports to China growing by double digits in most years. In 2016 Russia for the first time surpassed Saudi Arabia to become China’s largest crude oil importer. It did so in 2017 and 2018 as well and since 2019 Saudi Arabia regained the first place. What's interesting is that since 2019, the price of imported oil from Russia has been lower than that of Saudi Arabia every year. For example, in 2021, China paid USD 498.55 per ton to Saudi Arabia while paying USD 495.35 per ton for Russia's oil.

Elevated Fuel Prices Pose High Inflation Risk for India | April 11th 2022

The increase in crude oil prices as a result of Russia's invasion of Ukraine impacted India, which is a net oil importing nation, with a negative terms of trade shock. While diesel and petrol prices increased after a lag, they increased by a substantial 11.2% and 10% between March 21 and April 11. While global crude oil prices have climbed below USD 100 per barrel since April 7, 2022, fuel prices have remained sticky and yet to come down.

Manufacturing activity in Russia | April 5th 2022

Manufacturing activity in Russia dropped at its fastest pace since May 2020, according to March 2022 seasonally adjusted data for the S&P Global manufacturing PMI. Manufacturing PMI fell to 44.1 from 48.6 in February, on the back of strong contraction in output and new orders, as well as employment. The services PMI decreased even more, falling to 38.1 from 52.1 in February, while the composite PMI dropped to 37.7 from 50.8 in the previous month.

China Energy Imports from Russia | April 1st 2022

It's fair to say that energy products play such a vital role in China-Russia relations. According to China Customs data, in 2021, China's energy imports from Russia reached USD 50.96bn, accounting for more than 64% of China's total imports from Russia. To be more specific, crude oil dominates the China-Russia trade relations. In 2021, crude oil alone accounted for nearly 50% of China’s total imports from Russia. Russia’s crude oil exports to China have become increasingly important as their share in China's total oil imports is growing steadily from 6% in 2010 to 16% in 2021.

Russia's Exports to Brazil | March 29th 2022

In an effort to strengthen the ruble and decrease its currency settlement inflow of USD and EUR, Russian president Putin has announced that “unfriendly” countries will have to pay for Russian gas in rubles, within 7 days of his announcement on March 23, 2022. Russia’s current currency settlement inflow is dominated by USD and EUR, at 53.9% and 29.8% of total, compared to just 14.8% in RUB. Most contracts for Russian gas exports are in EUR, so it is unclear whether EU countries would comply with Russian intentions.

Euro Area: Consumer Confidence | March 29th 2022

Two of the popular global commodities spot indices are back on an upward path again. The S&P Goldman Sachs and the Bloomberg Commodity spot indices, which are used as a benchmark for commodities investments, are exhibiting quite volatile movements reflecting the uncertainty on the global markets. They were already unnerved in the beginning of 2022, as investors were absorbing the expectations that the interest rate hikes in the US will happen earlier than previously estimated. However, Russia's military invasion in Ukraine and the subsequent Western sanctions caused a spike in the indicators in the end of February, followed by a decrease until mid-March and an uptick again. As of March 21st, the S&P Goldman Sachs index stood at 755.95, with the base year equaling 100 being 1970. The Bloomberg Commodity indicator stood at 125.66 on the same date (100=1990). Both indices include variety of commodities, with the biggest weight in the S&P one attributed to the energy (71.3%), followed by agricultural commodities (13.3%), undustrial metals (6.7%), livestock (6%) and precious metals (2.7%). The target distribution in the Bloomberg spot index is as follows: energy (31.2%), grains (23%), precious metals (16.7%), industrial metals (16.7%), softs (7.7%) which include cocoa, coffee, cotton and sugar, and livestock (5.2%).

Current Composition of Settlement for Goods (Inflow) | March 24th 2022

In an effort to strengthen the ruble and decrease its currency settlement inflow of USD and EUR, Russian president Putin has announced that “unfriendly” countries will have to pay for Russian gas in rubles, within 7 days of his announcement on March 23, 2022. Russia’s current currency settlement inflow is dominated by USD and EUR, at 53.9% and 29.8% of total, compared to just 14.8% in RUB. Most contracts for Russian gas exports are in EUR, so it is unclear whether EU countries would comply with Russian intentions.

Global Commodity Spot Indicies | March 24th 2022

Two of the popular global commodities spot indices are back on an upward path again. The S&P Goldman Sachs and the Bloomberg Commodity spot indices, which are used as a benchmark for commodities investments, are exhibiting quite volatile movements reflecting the uncertainty on the global markets. They were already unnerved in the beginning of 2022, as investors were absorbing the expectations that the interest rate hikes in the US will happen earlier than previously estimated. However, Russia's military invasion in Ukraine and the subsequent Western sanctions caused a spike in the indicators in the end of February, followed by a decrease until mid-March and an uptick again. As of March 21st, the S&P Goldman Sachs index stood at 755.95, with the base year equaling 100 being 1970. The Bloomberg Commodity indicator stood at 125.66 on the same date (100=1990). Both indices include variety of commodities, with the biggest weight in the S&P one attributed to the energy (71.3%), followed by agricultural commodities (13.3%), undustrial metals (6.7%), livestock (6%) and precious metals (2.7%). The target distribution in the Bloomberg spot index is as follows: energy (31.2%), grains (23%), precious metals (16.7%), industrial metals (16.7%), softs (7.7%) which include cocoa, coffee, cotton and sugar, and livestock (5.2%).

US International Air Freight Price Index​ | March 15th 2022

The international air freight prices to and from the United States increased in the last quarter of 2021. They are measured by the index published by the US Bureau of Labour Statistics, which Fed uses to keep an eye on the supply chains disruptions, experienced globally in the wake of the economic recovery from the coronavirus-related crisis. As Russia, a key global commodity exporter, is now under severe sanctions imposed by major Western economies, the possibilities for further supply chains disruptions increase. The inbound index, with base year 2000, jumped in Q1 2020 and kept accelerating to reach 274.3 in Q4 2021. The outbound sub-indicator, on the other hand, is lagging and exhibited a more pronounced increase in the last quarter of 2021 to 211.6.

Renault's Market Share in Russia​ | March 15th 2022

The French automotive giant Renault had a 26.8% market share in Russia in January 2022, slightly less than the December figure (28.9%), according to own estimates. Renault owns the majority stake in AutoVAZ, the manufacturer of the well-known brand Lada. The acquisition of AutoVAZ allowed Renault to expand its market share from roughly 10% to around 30%. The highest figure ever - 33.5% - was reached in May 2020.

Russia: Natural Gas Exports Distribution, 2021​ | March 11th 2022

Over 50% of Russia's natural gas exports in 2021 were delivered to four countries: Germany, Turkey, Belarus, and Italy. The data by the Russian Federal Customs Service underscores how vulnerable some developed markets are to potential substantial reduction of the gas imports. Germany's share was 23.7% in 2021 or equal to 48.2bn cubic meters. Germany is heavily dependent on Russian gas. Any potential escalation of the conflict in Ukraine and of the economic sanctions imposed on Russia bode severe problems for Germany's energy sector. Even prior to the war, as the tensions between Russia and Ukraine were still in the field of diplomacy, the energy prices were on the rise, pushing consumer inflation on an accelerated path. Germans are traditionally sensitive towards price increases and any reduction of the gas imports and respectively - further price increases might deteriorate consumer and business environment in Euro Area's biggest economy. 

Russia: Crude Oil Exports Distribution, Q3 2021​ | March 11th 2022

More than half of Russia's crude oil exports go to only four countries. According to data from the Russian Federal Customs Service, 30.4% or roughly 18mn tons of the crude oil exports were delivered to China in Q3 2021, 16% - to the Netherlands, 8.2% to Germany and 6.7% - to its neighbor and ally Belarus. The third quarter of 2021 is the latest quarter with available data, but these shares have stayed roughly the same during the last five years. The crude oil exports to China began growing around 2010-2011 and from 3.4mn tons in the beginning of 2010 increased to a record high of 20.6mn tons in Q2 2020. 

Ukraine: Trade Balance​ | March 11th 2022

Ukraine has been maintaining a trade deficit for five consecutive years from 2016 until 2020. In 2015 the country registered a small surplus of USD 632.5mn. After the annexation of Crimea in 2014 Ukraine and Russia substantially reduced trade relations and the trade deficit, which Ukraine had with Russia, fell to as low as USD 1.6bn in 2016. Ukraine imports from the European Union than its exports. The country posted a USD 4.6bn trade deficit in the full year 2020, according to IMF data. The data for 2021 is only available up until November and it reveals that the trade gaps for the period January-November are USD 1.8n with the EU, which Ukraine aspires to join, and USD 2.2bn with Russia and USD 3.2bn overall.

Developed Markets: Consumer Inflation​ | March 11th 2022

Consumer inflation in many countries has been accelerating in 2021, long before the diplomatic tensions between Ukraine and Russia turned into a full scale war. With the commodities prices on the rise and demand outstripping supply both producer and consumer prices in the US, the Euro Area and other developed markets reached record high levels in 2021. In the US inflation reached 7.5% y/y in January and kept accelerating to 7.9% y/y in February. The Euro Area, which for a long time failed to reach its target inflation of 2%, is now seeing annual price increases well above that level: 5.5% y/y in January and 5.8% y/y in February. Japan, where price changes stayed negative for the whole year until August 2021, are now close to three-year high at 0.5% y/y in the first month of 2022.