1、Important disclosures appear at the back of this document Goldman Sachs Global Economics, Commodities and Strategy Research at https:/ BRICs Monthly Issue No: 11/02 February 18, 2011 Dominic Wilson +1 212 902 5924 Constantin Burgi +44 (0)20 7051 4009 Stacy Carlson +1 212 855 0684 Inflation in the
2、 BRICs The BRICs have seen a large acceleration in inflation in recent months, even relative to other EMs. In 2010Q4, India led the emerging world with average inflation of 9.3%yoy, followed closely by Russia (8.1%), Brazil (5.5%) and China (4.7%). We expect inflation to continue to accelerate in 20
3、11H1 in Brazil, China and Russia, while inflation in India has likely already peaked in year-on-year terms. Rising food prices have had a substantial impact on BRICs headline inflation due to the large weight of food in average consumption baskets, reflecting the inverse relationship between per cap
4、ita income and the proportion of income spent on food. The cyclical position of the BRICs has also contributed meaningfully to the acceleration in inflation. The BRICs (with the exception of Russia) experienced a more shallow downturn combined with a stronger recovery, and this has left many with li
5、ttle or no remaining spare capacity. Continued above-trend growth in the BRICs over the past few quarterswhich we expect to continue through the first half of 2011has translated into signs of overheating, including rising core inflation. BRICs policymakers have begun to react to the acceleration in
6、inflationary pressures. We ultimately expect them to be able to contain inflation through a combination of rate hikes and FX appreciation, and believe that hard landing scenarios will be avoided. Inflation has accelerated over the past several months in the BRICs. Rising local and global food prices
7、 have played a critical role, but overheating in the BRICs has also contributed, and this implies a larger potential role for policymakers in combating high inflation. We expect the inflation trend to continue in the short term, as tightening occurs incrementally and food prices continue to rise. Br
8、azil China India Russia-202468101207 10 07 10 07 10 07 10yoy%Core Inflation Pressures Are Larger Now than in 2007EnergyFoodCoreHeadlineSource: Haver Analytics, GS Global ECS Research012345678910IndiaRussiaTurkeyIndonesiaBrazilChinaMexicoSingaporeKoreaSouth AfricaPolandPhilippinesThailandColombiaChil
9、ePeruMalaysiaTaiwanyoy%BRICs Ended 2010* with Higher Inflation than Most EMs*Average in 2010Q4Source: GS Global ECS ResearchFebruary 18, 2011 Issue No: 11/02 2 BRICs Monthly Goldman Sachs Global Economics, Commodities and Strategy Research Inflation Outlook null Negativity towards emerging marketsin
10、cluding the BRICshas grown rapidly in recent months, due largely to the deteriorating EM inflation outlook and concerns about whether central banks will be able to tighten policy without inducing a hard landing. The improving outlook for the developed world, particularly the US, and unrest in the Mi
11、ddle East have reinforced this re-evaluation of EM prospects. null The BRICs have seen a large acceleration in inflation, even relative to other EMs. In 2010Q4, India led the emerging world with average inflation of 9.3%yoy, followed closely by Russia (8.1%), Brazil (5.5%) and China (4.7%). We expec
12、t inflation to remain high through 2011H1. On our forecasts, year-on-year inflation will peak in 2011Q2 in China and Russia, and in 2011Q3 in Brazil. Indian inflation should accelerate sequentially until 2011Q2, but has likely already peaked in yoy terms. null Rising food prices have played an impor
13、tant role in the recent inflationary surge in the BRICs. As food price shocks are usually tightly linked to weather outcomes, they tend to be shorter and less worrisome from a macroeconomic perspective (although the human consequencesparticularly in EMscan be grave). But cyclical positions are also
14、key to understanding BRICs inflation pressures. We believe that overheating in the BRICs has contributed to rising inflation pressures (with the exception of Russia) and implies a larger potential role for policymakers in combating high inflation. Rising Food Prices Have Played a Role. null Food pri
15、ces have risen rapidly since mid-2010 in Brazil, China and Russia, and since mid-2009 in India. This is primarily due to the doubling in global food prices1since last June, although the degree of pass-through to domestic prices is less than 1:1 given that local food baskets vary and local markets ar
16、e often relatively independent of global ones. Additionally, the BRICs often have controls on key foodstuffsfor instance, China recently instituted price controls on several food items, and both India and Russia banned grain exports. Several country-specific weather shocks have further boosted domes
17、tic food prices, including summer flooding in China, a severe drought in Russia and unseasonal rainfall in India. null Rising food prices have had a substantial impact on BRICs headline inflation due to the large weight of food in average consumption baskets, reflecting the inverse relationship betw
18、een per capita income and the proportion of income spent on food. null We use a simple model (introduced in Global Viewpoint 10/24) to estimate the impact of food prices on the path of BRICs headline inflation. We first convert a weighted index of global food prices2into local currency and compare t
19、his to CPI food inflation, and then use this as a proxy for the transmission of the global food price spike to local inflation. For the future path, we use our commodity and FX forecasts. The model suggests that inflation could pick up by roughly 1.3ppts in Brazil and China, and by 3.7ppts in Russia
20、, while it predicts a fall of 1.1ppts in India. The margin of error is large but it suggests that the lagged impact of international food inflation should continue to push BRICs inflation higher (except in India) in the months to come. Inflation: GS vs ConsensusGS Consensus* GS Consensus*USA -0.3 1.
21、6 1.7 1.9 1.0 1.9Japan -1.4 -0.9 -0.2 -0.1 0.2 0.0Euroland 0.3 1.6 1.7 2.0 1.8 1.8UK 2.2 3.3 3.9 3.9 1.7 2.0Brazil 4.9 5.2 6.4 5.1 6.4 4.7China -0.7 3.3 4.3 4.5 3.0 3.6India 3.6 9.0 6.7 6.8 5.4 6.2Russia 11.7 6.8 9.0 7.9 6.5 7.3BRICs 2.5 5.2 5.6 5.5 4.2 4.8Advanced Economies0.2 1.6 1.8 2.0 1.5 1.8Wo
22、rld 1.7 3.3 3.6 3.6 3.0 3.3* Consensus Economics Feb 2011 Source: GS Global ECS Research% yoy 2 00 9 20102011 20121. As measured by the S WPI used for all other India dataSource: GS Global ECS Research-50510152025Jan-09 Jul-09 Jan-10 Jul-10 Jan-11yoy%Food Inflation Has Picked Up in the BRICsBrazilCh
23、inaIndiaRussiaSource: National Statistics Offices, GS Global ECS ResearchFebruary 18, 2011 Issue No: 11/02 3 BRICs Monthly Goldman Sachs Global Economics, Commodities and Strategy Research .But Cyclical Positions Are Also Key null An important part of our 2011 outlook is that DMs and EMs are in very
24、 different cyclical positions. Whereas much of the developed worldparticularly the UShas plenty of room to grow due to large remaining output gaps, a more shallow downturn combined with a stronger recovery has left many EMs with little or no remaining spare capacity. As a result, continued above-tre
25、nd growth in the BRICs over the past few quarterswhich we expect to continue through the first half of 2011has translated into growing signs of overheating. null Underlying price pressures, as measured by core inflation, are on the rise in the BRICs. In Brazil, China and India, core inflation is not
26、iceably higher today than it was during the last commodity spike in 2007-08. Russias situation is somewhat different due to its much deeper cyclical downturn and slower recovery, and Russias high core inflation reflects higher trend inflation rather than a larger degree of overheating. null Tight sp
27、are capacity in the BRICs has also exacerbated the impact of the food price spike on overall inflation. There are signs that the relative price shock has begun to spill over into more generalised inflation, as rising food prices push up input costs for firms and wage demands from workers. We assess
28、the degree of inflation generalisation using indices first introduced in October.3These indices measure the combined CPI weight of items with inflation running above the upper bound of the inflation target.4 The BRICs have seen a larger degree of inflation generalisation relative both to most EMs, a
29、nd, with the exception of Russia, to their own experience in 2007-08. Policy Implications null DM central banks often prefer to see through relative price shocks such as the recent food price spike. But with little spare capacity, tight labour markets and less-well-anchored inflation expectations, B
30、RICs central banks are more likely to respond to moves in headline inflation. null And, indeed, BRICs policymakers (outside of Russia) have begun to react to the acceleration in inflationary pressures in recent months. Brazil, China and India commenced tightening cycles, and rates have risen by 2.5p
31、pts, 0.75ppts and 1.75ppts respectively. Rate hikes have been complemented by macro-prudential measures in Brazil and several reserve requirement increases in China. The BRICs generally have relied less on FX appreciation, which can help lower inflation by reducing import prices, and only Brazil has
32、 allowed its broad exchange rate to strengthen over the past six months. We expect more tightening (which we think is needed), including renewed appreciation of the CNY. null We ultimately expect BRICs policymakers to do what is needed to contain inflation and avoid hard landing scenarios. This will
33、 likely involve more concerted policy tightening efforts and greater exchange rate flexibility. Recent actions have pointed in this direction. Officials have publicly voiced concern about the current inflation situation, the pace of rate hikes has accelerated in Brazil, China and India, and all four
34、 BRICs have seen broad FX appreciation so far in February. Brazil China India Russia-202468101207 10 07 10 07 10 07 10yoy%Core Inflation Pressures Are Larger Now than in 2007EnergyFoodCoreHeadlineSource: Haver Analytics, GS Global ECS Research3. See Global Markets Daily, October 22, 2010. 4. If no t
35、arget exists, the central banks forecast for the year is used. RussiaChinaChileIndiaBrazilMexico PhilippinesPeruTaiwanMalaysiaKoreaColombiaThailandSouth AfricaIndonesiaPolandTurkeySingapore0102030405060700 5 10 15Inlfation generalization 2010Q4 (mom%saar)Inflation rate 2010Q4 (mom%)BRICs Ended 2010
36、with the Highest Sequential Inflation and Inflation Generalization-3-2-10123Brazil Russia India China% Appreciation of Broad Nominal Exchange Rates Has Been Limited Until RecentlyChange since JulyChange in Feburary to dateSource: GS Global ECS Research00.511.522.53Brazil India China RussiapptsPolicy
37、makers Have Begun to Raise Rates in Most of the BRICsChange since crisis troughSource: GS Global ECS ResearchEconomic Activity in the BRICs February 18, 2011 Issue No: 11/02 4 6070809010011012013014015007 08 09 10 11IndexBRICs Exchange Rate PerformanceBrazilRussiaIndiaChinaAppreciationSource: Nation
38、al sources, GS Global ECS Research5010015020025030035040045050005 06 07 08 09 10 11IndexBRICs Equity IndicesBrazil BovespaRussian Traded IndexIndia SensexShanghai A ShareSource: National sources, GS Global ECS Research-20-15-10-505101520253000 01 02 03 04 05 06 07 08 09 10 11%, yoyBRICs Industrial P
39、roductionBrazilRussiaIndiaChinaSource: National sources, GS Global ECS Research-50510152025303500 01 02 03 04 05 06 07 08 09 10 11%yoy, SA BRICs InflationBrazilRussiaIndiaChinaSource: National sources, GS Global ECS ResearchInflation has accelerated across all of the BRICs. Industrial production fel
40、l in Brazil, Russia and India in December but rose in China. Equities rose by 7% and 1.1% in Russia and China respectively, but fell by 4% in Brazil and by 10.1% in India. In January, the Yuan and Ruble appreciated, whereas the Rupee and Real depreciated. We, Dominic Wilson, Stacy Carlson and Consta
41、ntin Burgi, hereby certify that all of the views expressed in this report accurately reflect personal views, which have not been influenced by considerations of the firms business or client relationships. Global product; distributing entities The Global Investment Research Division of Goldman Sachs
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