Key events in EMEA and Latam

We expect the MPC meeting to be a non-event – the committee should reiterate its guidance on flat rates. There may be a motion for a cut, but only one member, Eryk Lon is expected to support it. The PMI manufacturing index is expected to increase towards 46pt following better readings in Germany.

After a surprisingly strong 3Q, we expect the positive momentum to continue in October. Manufacturing PMI will rebound in line with the business confidence indicator, while the new capacities which has just entered production will able to maintain an above-average growth in industry. Retail sales turnover growth to remain firm, reflecting the combination of the tight labour market and strong wage growth. The only caveat here could be (to some extent) the withheld purchases due to the Black Friday sales throughout November.

Following a sharp disinflation trend in recent months thanks to weak domestic demand, stable currency and the downward adjustment in food prices, we expect annual inflation to change course in November and rise to 10.7% (0.5% MoM) mainly on the back of the unsupportive base. GDP growth, as evidenced by high-frequency data is likely to turn positive on a YoY basis in the third quarter at 0.5% with improving private consumption due to stable currency, sharp fall in interest rates, better consumer sentiment, and accelerated bank lending, as well as base effects, kicking in.

3Q19 wage growth might disappoint the Czech central bank estimate of 7.2% YoY nominal growth, the same as the previous quarter, as data from tax collection signals slowdown in wage dynamics in 3Q. We expect 6.6% nominal growth, being transmitted into 3.7% YoY real wage growth as inflation reached 2.8% on average in 3Q. Retail sales are likely to decelerate after strong September figures, but mainly on the back of calendar bias (two days more in September, one less in October, in YoY terms)