MARKET MOVER - BNP PARIBAS - Investment Services India

Key Data Preview
Chart 1: UK Cumulative PSNB (GBP bn)
180
160 2008 2009 2010
140
120
2011 2012
100
80
60
40
20
0
April May June July Aug Sept Oct Nov Dec Jan Feb Mar
Sources: Reuters EcoWin Pro
Aug (f) July June May
PSNB (ex interventions) 15.5 0.6 14.6 18.5
BNP Paribas Forecast: Better, but Only a Bit
UK: Public sector (August)
Release Date: Friday 21 September
The recent figures for UK public finances have been
disappointing. In July, the monthly public finances posted a
GBP 0.6bn deficit, despite it normally being a bumper month
for corporation- and income-tax receipts. Over the four
months of the 2012/13 fiscal year to July, the deficit was
GBP 9bn more than it was a year earlier, despite the Office
for Budget Responsibility (OBR) forecasting borrowing for the
full fiscal year at GBP 120bn, down from GBP 126bn in
2011/12. Revisions and time issues could still markedly
improve the deficit picture this year, but it appears that the
weak cyclical position is also taking its toll.
In the August data, we are expecting some of the weakness
in tax receipts to unwind, though the underlying picture will
still look a trifle worrying.
Key Point:
The August data should look okay, but the trend is not
so encouraging.
Sources: Reuters EcoWin Pro
Chart 2: Canadian Inflation
m/m % Aug (f) Jul Jun May
Headline CPI 0.1 -0.1 -0.4 -0.1
Bank of Canada Core -0.1 -0.1 -0.4 0.2
BNP Paribas Forecast: Missing the Target
Canada: CPI (August)
Release Date: Friday 21 September
Food and energy prices likely increased in August, which is
expected to drive headline CPI higher on a m/m basis;
however, due to base effects, the y/y pace of inflation is
expected to be close to 1.1%. Meanwhile, core prices are
expected to post another negative number with the y/y pace
of core inflation likely to move significantly lower (from 1.7%
in July to our expected 1.2% in August).
The underlying pace of economic growth, wages and inflation
has been weak as of late, which leaves little underlying
pressure on the BoC to worry about inflation running above
their 2% target (see chart). Given our current subdued GDP
growth trajectory, we believe there is little reason for the BoC
to be concerned with the current inflation outlook, and we
expect the BoC to leave interest rates unchanged for some
time.
Key Point:
Despite a likely monthly increase in food and energy
prices, underlying price pressures are absent, taking
any pressure off the BoC to raise interest rates anytime
soon.
Market Economics 20 September 2012
Market Mover
45
www.GlobalMarkets.bnpparibas.com