Macro and politics

* We expect industrial production (IP) to exhibit a more limited contraction compared to the previous month. IP data for November will be released today @ 10:00 local time. To recall the previous month’s release: The sequential (the seasonal and calendar adjusted monthly figure) IP contracted by 0.9% m/m as of October, while the calendar adjusted IP narrowed by 3.1% y/y. Leading indicators for November suggest that the loss of momentum in IP has continued, yet at a slower pace. Accordingly, we expect the monthly change in sequential IP to remain in negative territory in November, albeit pointing to a more limited contraction compared to October. We believe that tight financial conditions will continue to exert pressure on industrial activity and that the weak outlook in activity will persist for some time. The evident rise in consumption in recent months raises the likelihood of positive quarterly growth in 4Q24. Nonetheless, we anticipate annual GDP growth to decelerate further over the next two quarters. Correspondingly, we project GDP growth to conclude 2024 at around 2.9%, with a further slowdown to 2.6% by the end of 2025.

* November Employment figures will be released @ 10:00 local time. The adjusted unemployment rate remained edged up to 8.8% from 8.7% as of October. The broad-based unemployment calculations also deteriorated as the rate of composite measure of labor underutilization – including time-related underemployment, potential labor force and unemployment—increased by 1.9 ppts to 27.6%. Furthermore, the combined rate of time-related underemployment and unemployment climbed to 18.5% from 17.3%, while the combined rate of unemployment and potential labor force rose to 19% from 17.9%.

* There was net foreign buying activity through standard portfolio channels, albeit modestly, during the week of December 27 – January 3. Accordingly, the equity and the bond market (excluding the repo transactions) market experienced a foreign inflow of USD42.1mn and USD187.5mn, respectively. Moreover, the foreigners’ share in total bond stock increased to 7.9% from 7.7% in the mentioned period. In annual terms, the equity market experienced a cumulative foreign outflow of USD2.4bn, while the bond markets (excluding the repo transactions) saw a cumulative foreign inflow of USD16.4bn. Besides, the residents’ FX deposits rose slightly by USD166mn (gold accounts excluded, EUR/USD parity adjusted) in the period of December 27 – January 3, while their total FX deposits (including gold, price adjusted) climbed moderately by USD144mn. The CBRT’s gross FX reserves rose by USD2.9bn to USD158bn, while net international reserves increased by USD4.1bn to USD67.6bn. Lastly, net reserves excluding swaps surged by USD2.9bn to USD46.6bn.