Key events in EMEA and Latam next week

In Hungary, retail sales are expected to maintain a strong pace of growth due to rising consumer confidence and higher wages, while industrial production is expected to improve due to last year’s low base.

The highlight of the week, however, will be the April inflation data - we see this a market mover. Headline inflation is anticipated to jump to 4.1% year-on-year, whilst core CPI is projected to be 4% YoY. Along with the National Bank of Hungary’s (still) dovish stance, this could be a good recipe for further weakening in the forint. The budget release on the same day will likely take a backseat, but we expect to see a better budgetary situation than a year ago.

Despite accelerating inflation, we think the National Bank of Serbia (NBS) will keep the key rate on hold at 3.0% at the 9 May meeting. Headline inflation was 2.8% in March, the highest since December 2017, though core inflation remained relatively muted at 1.3%. We believe that March inflation could mark the top for this year, though we don’t necessarily expect significantly lower numbers for the months ahead. Given the relatively stable inflation, lower GDP growth- 1Q GDP of 2.3% was below market expectations- and the slower pace of normalisation expected from the Federal Reserve and European Central Bank, we believe the NBS could strike a dovish tone.

Car production accelerated by 12% month-on-month in March, but high base effects - coupled with a one-off shutdown at a nuclear power plant - suggest industrial production figures will be muted on an annual basis. We might even see a growth figure of below 1% YoY. Separately, retail sales might be affected by the double-digit fall in new car registrations. Excluding cars, retail sales should be relatively solid - though weaker than in February. The unemployment rate in April will further fall due to typical seasonal factors, though some industrial companies are signalling a minor fall in employment due to weaker foreign demand. For now though, the labour market remains tight.