Some signs of a slowdown at the start of Q3

The raft of second quarter GDP figures for Emerging Europe released this month painted a relatively bright picture, as regional growth hit a two-year high of 1.5% y/y. However, some of the more timely figures suggest that this improvement may not have been sustained. Our GDP Trackers indicate that the Russian economy contracted at a slightly steeper pace in July compared with Q2, and that Poland’s economy slowed in July. Meanwhile, last month’s attempted coup in Turkey appears to have caused consumers there to postpone large purchases. July’s manufacturing PMI surveys in the region weakened too. Nonetheless, we don’t think this is enough to get concerned about growth in the region. Other surveys, such as the European Commission’s economic sentiment indicators, were strong at the start of Q3. And, overall, we still think growth in Emerging Europe as a whole will pick up in the coming years. But the latest data reinforce our view that growth in much of the region will be a touch weaker than most expect over the next couple of years.