Review

  • The pace of decline in Lithuanian retail trade decelerated in January showing a decline of 12.2% y/y up from 23.6% y/y ; the outcome was marginally worse than our expectation of 9.3% y/y fall. As was broadly expected, the main reason for the improvement was the positive base effect which will continue to play a major role. We do not expect an improvement in disposable income outlooks thus consumption will remain sluggish as well.

  • Latvian retail trade improved in January, it declined by 16% y/y significantly up from a drop of 30.2% y/y in December. Also in Latvia the improvement was driven by the positive base effect.

  • Lithuanian statistics revised marginally GDP figures for Q4 09 to -12.8% from preliminary -13.0%. Besides, it was a significant downward revision from 6% q/q to 1% q/q of the seasonally-adjusted data for Q3 09. The latter revision has only a marginal impact on annual data, for all 2009, GDP fell by 15% y/y. An easing slump in industrial production and export is signalling stabilisation signs in the economy. But, the closure of the nuclear power plant would weigh down on recovery prospects this year.

  • In Latvia a hacker that goes under the pseudonym, Neo, has caused a stir. The hacker has exposed payments and salaries of government officials and senior employees in public entities, which seem to have escaped the austerity measures that have been foisted upon most other public employees. This discord in economic suffering between those close to the political power and other ordinary Latvians could serve to undermine the efforts by the Latvians to deflate their economy.


Preview

  • The attention will be on the PMI for February, which is due for release across the EMEA region. In January, we saw an extremely strong rise in Hungarian PMI (to 53.5) which was in our view rather odd. We would not be surprised if the Hungarian PMI falls back somewhat in February.

Trading update

  • Going into this week, with Turkish political tensions on the agenda and continued serious worries about the Greek crisis, a picture of South Eastern Europe is cloudy. This could in our view have an impact also on the CEE markets with the Hungarian forint being at the most risk if the concerns over South Eastern Europe escalate. Considering also the signals from our EMEA FX Scorecard, we keep our trade recommendation to Buy PLN/HUF open.