TBC Capital published an Update from the Chief Economist. As of the document, September price indices, other than consumer one, point to a further decline in inflation, including PPI which is often seen as a leading indicator for the CPI dynamics. Furthermore, after the recovery, international commodity prices once again turn to a declining trend.
"However, we are not convinced we should lower our latest EOP CPI inflation outlook of 9.4% as the pass-through on the local market and other drivers should be considered as well. The NBG policy rate outlook is also kept unchanged. Besides the judgment outlined 2 weeks ago, recent GEL strengthening is also an argument in favor of the stance being unchanged, rather than the rate hikes.
On the other data release side, there were also no major surprises. Namely, an estimated balance of trade in goods, growth of tourism inflows, including the migration impact, and adjusted remittance inflows further improved, though our latest baseline implied even stronger September tourism data as compared with the NBG estimates.
The relatively slower imports growth was mostly on the back of flat investment goods category, though after a strong pickup in the previous months. As for the exports, the recovery in real domestic production was noticeable, together with the indicators of domestic demand, other than imports, enabling to argue that the September growth print should come in at somewhat above 10%. Strong growth may be seen as an argument for the rate hikes, however, the one is in line with our expectations and we have not changed the latest growth normalization outlook. Furthermore, September credit data, to be discussed in more details in our next update, cooled slightly, but still more than expected. In fact, the question remains regarding the timing of the rate cuts rather than tightening",- TBC Capital reports.
