Key events in EMEA and Latam next week

Soft indicators continue to show a rebound. After an improvement in consumer confidence in July, we see business sector confidence inching closer to pre-crisis levels. We also get the latest update on Hungary's labour market. Misclassification is still affecting the unemployment rate so the expected official 5% rate is more likely to be around 8% in reality. Wage growth should remain quite sound despite the Covid shock as previous wage hikes in manufacturing, an increase in the minimum wage and short-term work schemes continue to support the job market.

We get the flash GDP estimate for the second quarter next week, and for the first time it will be published 30 days after the end of the quarter, while previously it was 45 days later. As such, we do not have June's monthly statistics yet, which makes estimates less reliable. The Czech National Bank's median estimate of a quarter-on-quarter decline of almost 11% is equivalent to a 13% year-on-year decline, while its older estimate pencilled in a year-on-year fall of 10%. As such, a double-digit annual decline seems a done deal given the adverse Covid-19 shock. For the whole of 2020, we expect a 7% contraction, though the pace of recovery in the second half will play an important role.

The flash CPI reading will be published on Friday. This shouldn’t be a market event, as the central bank is focused on the real economy. CPI should remain elevated throughout the third quarter, given pent-up demand and Poles spending their holidays at home rather than abroad, pushing up prices in tourist regions. However, in the fourth quarter, we expect a fast deceleration in prices.