Central Europe recovers as Russia struggles

The latest activity data show that the recovery in Central Europe that started in the second half of last year gathered pace in Q1. Our GDP trackers suggest that growth in the Czech Republic, Hungary and Poland could have picked up to as much as 3.5% y/y. What’s more, the recovery seems to be broad based. Not only are export-led industrial sectors improving on the back of stronger demand from the euro-zone, but consumer spending is also staging a (long-awaited) recovery. Elsewhere, Russian equities and the ruble have come under renewed pressure on the back of the unrest in eastern Ukraine. Conditions in Russia’s financial markets are tightening although, for now, there are few signs of extreme financial stress.