FINANCIAL MARKET INFLATION EXPECTATIONS JUNE. Financial Markets Department Operations Analyses Division

Transcription

1 FINANCIAL MARKET INFLATION EXPECTATIONS JUNE Financial Markets Department Operations Analyses Division 2012

2 I. SUMMARY 2 Nine domestic and one foreign analyst sent in their contributions to the June survey. The survey results reveal that the annual inflation forecast stopped rising and was unchanged from the previous survey. The GDP growth estimate was revised significantly downwards for both this year and the next. Most of the analysts were expecting the 2W repo rate to be lowered by 25 bp in June. The 12M PRIBOR and 5Y and 10Y IRS forecasts were also shifted significantly downwards. The koruna-euro exchange rate expected at both monitored horizons responded to the depreciation on the foreign exchange market. Nominal wages are expected to increase slightly more this year than expected in the May survey, while the view for next year is considerably more pessimistic than last time. DOMESTIC ANALYSTS I. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII. Martin Lobotka, Česká spořitelna David Marek, PATRIA Finance Josef Novotný, Fio banka, a.s. Jan Vejmělek, Komerční banka Pavel Sobíšek, Unicredit Global Research Michal Brožka, Helena Horská, Raiffeisenbank Petr Dufek, ČSOB Petr Sklenář, J&T Banka Radomír Jáč, Generali PPF Jaromír Šindel, Citi + Vojtěch Benda, ING Commercial Banking Tomáš Holinka, Moody's Analytics FOREIGN ANALYSTS Magdalena Polan, Goldman Sachs Katya Kocourek, The Economist Intelligence U Nicolaie Alexandru, JP Morgan + We would like to thank everyone who contributed to this survey of financial market inflation expectations. Prague, 27 June 2012

3 3 II. INFLATION 1R 3Y Prediction Horizon 1Y 3Y 1Y June CPI y/y CNB 2012 Date of Prediction y/y CPI minimum 2,2 1,6 VI-11 2,7 2,1 VII-11 2,7 2,4 3Q: 3,1 maximum 2,6 VIII-11 2,8 2,3 XI-11 2,8 2,2 4Q: 2,8 II-12 1,9 2,1 IV-12 2,4 2,2 V-12 2,2 2Q: 1,9 VI-12 2,1 The annual inflation forecast was unchanged from May, staying at 2.5. At the threeyear horizon there was a slight decrease (of 0.1 bp to 2.1). According to the analysts, the consumer price index should remain slightly above 3 in the coming months and gradually decline below this level towards the end of the year. Following a sharp increase at the start of the next year (due to a VAT change), inflation is expected to fall gradually to the 2 inflation target. Demand-pull pressures are not significant, nor are they expected to rise in the near future given the weak consumer spending. Consequently, there is little scope for stronger second-round effects of the VAT increase. The main risks that might cause a deviation from the expected path include oil prices, the harvest affecting agricultural prices, and the koruna s exchange rate against the euro and the dollar. Owing to an increase in the minimum value and a decline in the maximum value, the range of the forecasts at the one-year horizon narrowed considerably further towards its usual levels. At the three-year horizon, the difference between the extreme values decreased slightly due to a decline in the maximum forecast. CPI for 1Y: and range of the predictions CPI prediction () I-10 VIII-10 III-11 X-11 V-12 1,0 range of predictions (p.p.)

4 II. INFLATION 4 CPI: actual data and predictions of analysts () and of CNB for 1Y 4,0 1,0 actual data CNB analysts I-10 VII-10 I-11 VII-11 I-12 VII-12 I-13 3,40 CPI for 1Y: predictions of individual analysts 0 2,60 2,20 1,80 1,40 1,00 analysts

5 5 III. GROSS DOMESTIC PRODUCT Prediction Horizon end of year end of year current current+1y June current +1Y Date of Prediction GDP Growth 2012 GDP VI-11 2,1 2,8 minimum -1,0 0,7 VII-11 2,1 2,7-0,5 1,3 VIII-11 2,1 2,2 maximum 0,1 1,7 XI-11 1,9 0,9 II-12 0,2 2,1 IV-12 0,2 1,9 V-12 1,8 VI-12-0,5 1,3 Although the CZSO revised the quarter-on-quarter contraction in GDP in 2012 Q1 from -1.0 to -0.8, the analysts forecasts dropped significantly further. The Czech economy is thus expected to record an overall decline of 0.5 this year (as against an expected stagnation in the previous survey) and to recover to only 1.3 next year (as against 1.8 in the previous survey). The range of forecasts narrowed as a result of a greater decline in the maximum values in both years under review. The worsening outlook for the domestic economy stems mainly from the debt situation in the EMU, which has not been resolved yet. The analysts foresee a deterioration impacting negatively on Czech industry and subsequently on the whole economy. Developments on European export markets, Germany in particular, pose the biggest risk to domestic economic growth. Household and government consumption will continue to be the main burden on the demand side. Investment activity will be very cautious despite low interest rates. It will be negatively affected by uncertainty associated with the EMU and constraints on public investment in infrastructure. The domestic economy is expected to continue to be driven by net exports, albeit less significantly in GDP growth in the current year: and range of the predictions GDP prediction () I.10 VII.10 I.11 VII.11 I.12 2,4 2,1 1,8 1,2 0,9 0,6 0,3 range of predictions (p.p.)

6 IV. INTEREST RATES 6 1M 1Y 1M 1Y 1M 1Y 1M 1Y June 2W Repo Rate 12M PRIBOR 5Y IRS 10Y IRS 2012 minimum 0,50 0,25 1,30 0,90 1,30 1,10 1,70 0 0,53 0,50 1,61 1,61 1,38 1,80 1,80 2,20 maximum 0,75 0,75 1, ,10 1,95 2,60 Prediction Horizon 1M 1Y 1M 1Y 1M 1Y 1M 1Y 2W Repo Rate 12M PRIBOR 5Y IRS 10Y IRS Date of Prediction VI-11 0,77 1,63 1,85 2,48 8 3,27 3,12 3,75 VII-11 0,80 8 1,82 2,43 2,40 3,25 2,94 3,68 VIII-11 0,75 1,38 1,75 2,26 2,14 2,86 2,72 3,36 XI-11 0,75 0,80 1,71 1,91 1,74 2,38 2,23 2,84 II-12 0,75 0,85 1,74 1,92 1,71 2,32 2,20 2,75 IV-12 0,75 0,88 1,78 1,97 1,81 2,46 2,23 2,83 V-12 0,69 0,71 1,74 1,84 8 2,22 1 2,63 VI-12 0,53 0,50 1,61 1,61 1,38 1,80 1,80 2,20 Actual indicator values as of forecast deadline 2W 12M 5Y 10Y Repo Rate PRIBOR IRS IRS ,75 1,76 1,46 1,90 Only one respondent felt that the CNB s key interest rate would remain unchanged in June (this respondent expects it to be reduced in August); the other respondents were expecting the 2W repo rate to go down by 25 bp to The analysts rank lower inflation, the absence of demand-pull pressures, weak growth in industry and the pessimistic outlook for the economy among the key reasons for easing monetary policy. A weaker exchange rate of the koruna is the main counter-argument. The 2W repo rate forecast declined by 21 bp to 0.50 at the one-year horizon. The individual estimates range between 0.25 and The forecasts for the 12M PRIBOR also recorded a marked shift of 13 bp at the one-month horizon and 23 bp at the one-year horizon. Similar developments can be seen for IRS rates, which declined by bp. A larger change was recorded at the longer end of the yield curve.

7 7 IV. INTEREST RATES 3,5 12M PRIBOR for 1Y: and range of the predictions 12M PRIBOR prediction () I-10 VIII-10 III-11 X-11 V-12 1,0 range of predictions (p.p.) 5Y IRS for 1Y: and range of the predictions 4,0 5Y IRS prediction () 3,5 1,0 0,5 range of predictions (p.p.) I-10 VIII-10 III-11 X-11 V-12

8 IV. INTEREST RATES 8 2W Repo Rate and 12M Pribor for 1Y: predictions of individual analysts ,00 0,50 2W Repo Rate 12M PRIBOR 0 analysts 12M PRIBOR: actual data and prediction of analysts for 1Y actual data 1Y prediction I-10 VII-10 I-11 VII-11 I-12 VII-12 I-13

9 9 V. EXCHANGE RATE Prediction Horizon 1M 1Y 1M 1Y Exchange Rate EUR/CZK June Exchange Rate Date of Prediction 2012 CZK/EUR VI-11 24,28 23,68 minimum 25,30 23,25 VII-11 24,34 23,71 25,57 24,40 VIII-11 24,23 23,75 maximum 26,00 25,40 XI-11 25,52 24,27 II-12 25,15 24,08 IV-12 24,79 23,91 Actual EUR/CZK as of forecast deadline V-12 25,44 24, ,60 VI-12 25,57 24,40 A further depreciation on the foreign exchange market shifted the forecast for the koruna against the euro to weaker levels. The analysts expect the koruna s exchange rate to fluctuate around CZK 25.6 against the euro until mid-july and to appreciate to CZK 24.4 against the euro in the following 12 months. External factors still pose the greatest risk of deviation of the actual exchange rate of the koruna from the projected path. An escalation of the EMU s current problems may foster an increase in risk aversion and a deeper depreciation of the koruna. EUR/CZK for 1Y: and range of the predictions 25,50 3,6 EUR/CZK prediction 25,00 24,50 24,00 2,9 2,1 1,4 of predictions (p.p.) 23,50 I-10 VII-10 I-11 VII-11 I-12 0,6

10 V. EXCHANGE RATE 10 EUR/CZK: actual data and prediction of analysts for 1Y 26,5 26,0 25,5 25,0 24,5 24,0 23,5 actual data 1Y prediction 2 I-10 VII- 10 I-11 VII- 11 I-12 VII- 12 I-13 EUR/CZK for 1Y: predictions of individual analysts 25,50 25,00 24,50 24,00 23,50 20 analysts

11 11 VI. WAGES end of year Prediction Horizon end of year June current +1Y current current+1y 2012 Wages Date of Prediction Wage Growth minimum 2,30 0 VI-11 2,3 4,2 2,79 3,21 VII-11 2,3 4,2 maximum 3,30 3,50 VIII-11 2,3 3,6 XI-11 2,3 2,9 II-12 2,6 3,3 IV-12 2,8 3,4 V-12 2,7 3,6 VI-12 2,8 3,2 The nominal wage growth estimate for this year went up slightly (by 0.1 percentage point), while the forecast for next year was corrected significantly downwards (by 0.4 percentage point) in line with the worse economic outlook and greater tensions on the labour market. Wages growth is expected to reach 2.8 in 2012 and to rise to only 3.2 in The analysts who made a distinction between the forecast for wage growth in the business sector and that in the non-business sector expect wages to grow this year by 2.9 in the business sector (compared to 3.1 in May) and 2.0 in the non-business sector (compared to 2.3 in May). In 2013, wages in the business sector are expected to increase by 3.4 and those in the non-business sector by 2.5. Wage growth - end of the current year: and range of the predictions wage prediction () I-10 VII-10 I-11 VII-11 I-12 4,5 4,0 3,5 1,0 0,5 range of predictions (p.p.)