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RUSSIA Economy Snapshot— According to the Economy Ministry, Russia’s economic contraction deepened in March, with output declining 3.4%y/y due to weakness in retail sales, construction and gas exports. Russian first quarter GDP is now tracking a 2.2% decline,which is set to intensify during the second quarter as the country continues to grapple with lower global oil prices and economicstress from US-led sanctions. Against this backdrop, the Central Bank of Russia (CBR) continues to lower interest rates fromemergency levels. The CBR announced a greater-than-expected 150 basis point (bps) rate cut on April 30th, bringing itsbenchmark one week auction rate to 12.5% — resulting in a cumulative reduction of 450 bps so far this year. Whileimprovements in some indicators has generated room for optimism in Moscow, such as the modest recovery in Brent crudeprices, the appreciation of the ruble on the back of government intervention, and the Minsk II agreement appears to bepreventing the conflict from escalating in Ukraine, the overall economic picture is less benign. Russian industrial productionremains anemic, PMIs are in contractionary territory, and headline inflation is alarmingly high at 16.9% y/y in March — almosttriple the rate a year earlier. Furthermore, private consumption will likely continue to be depressed by the steep decline in realwages and rising unemployment, while business investment should contract sharply due to restrictive financial conditions andheightened economic uncertainty. We expect Russian real GDP to contract by -5% in 2015 and grow 0.5% in 2016, with annualinflation at a year-end rate of 12.5% and 7.9%, respectively.
UNITED STATES Economy Snapshot — The US economy stalled in early 2015, with a steep pullback in oil & gas drilling and exploration activity in response to low global oil prices compounded by weather, transportation and production disruptions.
Growth is expected togather renewed momentum in the spring as the impact of some of these temporary factors fades. Consumer confidence and spending are well supported by strengthening job and income gains, cheaper gasoline prices, low borrowing costs, and rising stock market pricing and home values. Notwithstanding some slowing in the pace of job growth in recent months, theunemployment rate remains at a seven-year low of 5.5%, while alternative measures of labour market underutilization such asthe number of involuntary part-time and discouraged workers continue to improve. Auto sales remained near record levels inMarch and April. The recovery in the US housing market has been slow, with homes sales and construction restrained by stilltight credit conditions, high student debt loads and limited inventory in some segments of the market. However, a gradualeasing in lending conditions alongside low borrowing costs, still healthy affordability and improving job markets should underpina stronger performance this year. The overall momentum in industrial activity, business spending and capital goods orders hassoftened in recent months alongside the retrenchment in oil & gas drilling and sluggish export sales. While US dollar strengthand moderate global growth are expected to weigh on export activity this year, solid domestic sales should maintain expandingmanufacturing production. At the same time, the US economy is getting a lift from a pickup in local and state governmentspending, and a reduced pace of federal fiscal restraint. Headline US inflation dropped to -0.1% y/y in March on lower energyprices. However, core inflation is holding steady at just under 2%, with lower import costs and still-restrained wage gainstempered by firmer services price trends.CANADA Economy Snapshot — The first quarter of 2015 has revealed softer-than-expected economic data, with persistent commodity priceweakness dragging on growth, and spillover effects from the US limiting exports. Even with an expected pickup in activity in thesecond half of the year, GDP is likely to advance less than 2% y/y this year, following 2 ½% growth in 2014. Employment grewjust above ½% in 2014, the lowest in five years, with sluggish wage growth continuing into the first few months of this year. Weexpect the labour market to add roughly 10,000 jobs per month this year, a similar pace to 2014, with positive momentum in themanufacturing sector offsetting restructuring in the oil patch. Vehicle sales remain one of the strongest retail sectors, and arelikely to edge up to record highs in 2015. However, consumers are expected to be relatively cautious spenders in the yearahead as pent-up demand is limited, and homeownership rates remain at record levels. Manufacturing and non-energy exportsremain stable with producers benefitting from rising auto sales and residential construction in the US, and from a morecompetitive currency. Business investment remains weak as excess capacity combined with moderate sales growth continuesto weigh on capital spending plans, despite healthy corporate finances and favourable financing costs. However, industries withtighter capacity utilization and strong ties to the United States will record healthier investment, including forest products,transportation equipment, aerospace, and industrial machinery. Headline inflation has receded this year alongside fallinggasoline prices and soft wage gains; at the same time, core inflation has trended up to slightly above 2% reflecting the passthroughof a weaker Canadian dollar to a range of imported goods.Regards Carissimi
UNITED STATES Economy Snapshot — The US economy stalled in early 2015, with a steep pullback in oil & gas drilling and exploration activity in response to low global oil prices compounded by weather, transportation and production disruptions.
Growth is expected togather renewed momentum in the spring as the impact of some of these temporary factors fades. Consumer confidence and spending are well supported by strengthening job and income gains, cheaper gasoline prices, low borrowing costs, and rising stock market pricing and home values. Notwithstanding some slowing in the pace of job growth in recent months, theunemployment rate remains at a seven-year low of 5.5%, while alternative measures of labour market underutilization such asthe number of involuntary part-time and discouraged workers continue to improve. Auto sales remained near record levels inMarch and April. The recovery in the US housing market has been slow, with homes sales and construction restrained by stilltight credit conditions, high student debt loads and limited inventory in some segments of the market. However, a gradualeasing in lending conditions alongside low borrowing costs, still healthy affordability and improving job markets should underpina stronger performance this year. The overall momentum in industrial activity, business spending and capital goods orders hassoftened in recent months alongside the retrenchment in oil & gas drilling and sluggish export sales. While US dollar strengthand moderate global growth are expected to weigh on export activity this year, solid domestic sales should maintain expandingmanufacturing production. At the same time, the US economy is getting a lift from a pickup in local and state governmentspending, and a reduced pace of federal fiscal restraint. Headline US inflation dropped to -0.1% y/y in March on lower energyprices. However, core inflation is holding steady at just under 2%, with lower import costs and still-restrained wage gainstempered by firmer services price trends.CANADA Economy Snapshot — The first quarter of 2015 has revealed softer-than-expected economic data, with persistent commodity priceweakness dragging on growth, and spillover effects from the US limiting exports. Even with an expected pickup in activity in thesecond half of the year, GDP is likely to advance less than 2% y/y this year, following 2 ½% growth in 2014. Employment grewjust above ½% in 2014, the lowest in five years, with sluggish wage growth continuing into the first few months of this year. Weexpect the labour market to add roughly 10,000 jobs per month this year, a similar pace to 2014, with positive momentum in themanufacturing sector offsetting restructuring in the oil patch. Vehicle sales remain one of the strongest retail sectors, and arelikely to edge up to record highs in 2015. However, consumers are expected to be relatively cautious spenders in the yearahead as pent-up demand is limited, and homeownership rates remain at record levels. Manufacturing and non-energy exportsremain stable with producers benefitting from rising auto sales and residential construction in the US, and from a morecompetitive currency. Business investment remains weak as excess capacity combined with moderate sales growth continuesto weigh on capital spending plans, despite healthy corporate finances and favourable financing costs. However, industries withtighter capacity utilization and strong ties to the United States will record healthier investment, including forest products,transportation equipment, aerospace, and industrial machinery. Headline inflation has receded this year alongside fallinggasoline prices and soft wage gains; at the same time, core inflation has trended up to slightly above 2% reflecting the passthroughof a weaker Canadian dollar to a range of imported goods.Regards Carissimi