The Lastest Macroeconomic News
11.02.2021 13:00 Inflation in Russia is expected to be at 3.5-4.0% by the end of 2021
With CPI spiking 5.2% YoY in January and near-term context still pro-inflationary, further cuts in the 4.25% key rate are now unlikely. But as long as year-end CPI expectations are within the current 3.5-4.0%, and CPI risks in the EM space are under control, the Russian real rate is high enough for the central bank to avoid a key rate increase in 2021. Acceleration in the Russian CPI from 4.9% year-on-year in December 2020 to 5.2% YoY in January is slightly better than the market consensus of 5.3% YoY, but still this result is likely to call for more caution in the upcoming key rate decision by the Central Bank of Russia on 12 February. The overall CPI trajectory trails the upper range of expectations announced by the CBR at its December meeting.
28.01.2021 11:32 Russian industry: 2020 ended on an upbeat note
In 2020, industrial production dropped 2.9% YoY, almost entirely due to a drop in commodity extraction. Industries recovered dramatically by the year-end, helped by the consumer recovery, higher demand for electricity amid cold weather, and by a favourable calendar effect. The result is positive, but fiscal consolidation is a watch factor for 2021. According to preliminary data, Russian industrial production saw a very shallow 0.2% year-on-year drop in December 2020, which is significantly better than the -3.0% Reuters consensus. As a result of this and a 1.1 percentage point upgrade of the November number to -1.5% YoY, the full-year drop in industrial production was limited to -2.9% YoY, which is better than the -3.5% analysts expected.
30.12.2020 19:46 Russian consumers running out of steam while producers outperform
Russian activity and banking data for November confirm the deterioration of consumer sentiment but producers seem to have become more upbeat. With limited room for further fiscal and monetary support, GDP recovery prospects for 2021 appear modest. Retail trade in Russia dropped to -3.1% year-on-year in November following the 1-2% YoY drop seen between July-October. Although these numbers are better than our expectations and consensus, they still point towards a hiccup in consumer recovery. The substantial drop took place amid accelerating CPI, mainly due to higher food prices and a slowdown in nominal and real salary growth despite falling unemployment. We are particularly concerned that banking sector data shows a continued slowdown in retail deposit growth to 5.6% YoY (net of FX revaluation) in November from 6-7% in October, while retail lending growth also continues to slow down after a brief spike in October, but remains in double-digits. This suggests that a deterioration in consumption is taking place amid a declining savings rate and partly explains the recent announcement of additional social support measures.
14.12.2020 21:28 Russian activity: resilient in the face of the second wave
Despite the second wave of Covid-19, consumption resumed a recovery path in October, but this has come at the expense of a lower savings rate given increased underemployment. The corporate side appears stable, with construction volumes flat and corporate lending picking up. Yet analysts aren`t building their hopes up for the year-end and 2021 numbers. Retail trade growth continued to improve in October, with a drop of just 2.4% YoY being close to consensus expectations and better than -3.0% seen in September. The number is better than analysts suggested by the high frequency mobility and transaction indicators, which have been pointing at the negative impact of the pandemic resurgence that started in early to mid-October.
15.11.2020 13:53 Russian GDP improves thanks to local consumer demand
Russia`s GDP decline narrowed from -8.0% YoY in 2Q20 to -3.6% YoY in the third quarter, in line with our expectations. The positive effect of local consumption recovery outweighed the toll of the OPEC+ deal. In 4Q20, the recovery should not be as pronounced, but the full-year result should be close to expectations of -3.0% YoY. Household consumption was the primary driver of the improvement. A mid the lifting of the lockdowns in July and the socially-focused fiscal stimulus, the retail trade decline narrowed from -16.0% YoY in 2Q20 to -2.5% YoY in 3Q20. This should have added 4.0 percentage points to the GDP to the growth rate. The improvement in the consumer services segment has been more modest (from -40-50% YoY to -20-30% YoY respectively), but their importance to the GDP number is too small to matter. Meanwhile, high-frequency indicators point to a moderation in consumer recovery that analysts have seen since September due to renewed Covid-19 fears and end of the peak in fiscal stimulus.
10.11.2020 14:29 Russian CPI hits the 4% target, may go higher in the near term
The increase in CPI in October is not surprising, given the ruble depreciation and low base effect of 4Q19, and should be largely discounted by the central bank. But the mounting pressure from agriculture prices and signs of extended fiscal easing at the regional level are watch factors for 2021, which may minimize the key rate downside. The pick-up in CPI from 3.7% year-on-year in September to 4.0% YoY in October is neither dramatic, nor unexpected. Out of the 0.3 percentage point acceleration 0.2ppt are attributable to the low base effect of 2019, which saw a material deceleration in 2H19 on tight budget policy, stable markets, and delayed tariff indexations. The remainder is the continued effect of RUB depreciation, which totaled 2.4% to USD and 1.6% to EUR in October. Given this, and the renewed weakness in consumption, Bank of Russia treats the current spike in the CPI as temporary, which means that this near-term spike in inflation is unlikely to reverse the generally dovish stance of the Russian central bank. Nevertheless, looking deeper at the structure of CPI, and in the newsflow around the fiscal policy we see factors that could potentially worsen the CPI outlook for 2021 and minimize the downside to the 4.25% key rate.
02.11.2020 13:56 Inflation in Russia will remain close to 4% in 2020 and 2021
Bank of Russia kept the 4.25% key rate on higher near-term CPI and market risks. It also maintained its medium-term dovish signal, in line with our expectations. CBR may resume cutting towards 3.5-4.0% if it becomes more evident that GDP and CPI will underperform in 2021, which we find increasingly likely. The decision to extend the tactical hold reflects increased near-term pro-inflationary pressure amid market volatility. The CBR`s year-end 2020 CPI target is slightly raised from 3.7-4.2% to 3.9-4.2%. The CBR quotes recent RUB depreciation and foreign policy uncertainty as the primary cause. We agree that given the recent RUB depreciation by 8% to USD and by 12% year-on-year to EUR in 3Q20, the year-end CPI is more likely to approach 4.0% rather than our initial 3.7% forecast. CBR`s macro forecast remained unchanged for year-end 2021 CPI, with the 3.5-4.0% range reiterated.
25.10.2020 14:36 Russia: Consumption recovery stalls in September
The drop of retail trade in September underpins the halt in the post-Covid recovery, which we also observe on the corporate side. The good news is that the hiccup in consumption likely reflects a higher savings rate rather than a deterioration in the income trend. The bad news is that consumers may remain cautious well into 4Q20. In September, retail trade was down 3.0% year-on-year, which is a deterioration compared to the 2.7% YoY drop seen in August, and a disappointment relative to the -2.1% YoY consensus. Analysts do not take the deepening retail trade drop in September as a sign of material deterioration in consumer strength. To remind, the opportunity to travel to Turkey and several other resort destinations has been reopened to Russians since mid-August, which may have resulted in a 2-4 percentage point drag on the local demand.
28.09.2020 15:15 Andrey Berezin: government support for the development of the Svetlana plant is an important contribution to the region`s economy
The Svetlana company has invested more than 30 million rubles received from the IDF in increasing the production capacity of its subsidiary Svetlana-Electronpribor JSC. Andrey Berezin, Chairman of the Management Board of the Investment Company Euroinvest, noted that such investments are an important case of cooperation between the state and the private sector. Directional means are intended for the production of component parts for microwave devices. The largest monetary contribution was made by the St. Petersburg Industry Development Fund. Earlier it became known that IDF has drawn up new loan programs with a rate of 1% per annum. Under one of these programs, Svetlana received a five-year loan for 30.7 million rubles to purchase equipment. A feature of the new project is an extremely low interest rate in the form of 1% for the first year, 3% for the second and third years, the last two years will cost 5%.
11.09.2020 11:16 Russian Q2 GDP drop not too deep, but broad-based
According to the State Statistics Service (Rosstat), Russian GDP dropped 8.0% year-on-year in 2Q20. This is better than Rosstat`s own initial -8.5% and the preliminary estimates by the Central Bank and the government of -9-10%. Conversely, this is closer to our initial forecast of -7.5%. In addition to the updated headline estimate, Rosstat provided a breakdown by industry, which confirmed a moderate contribution of the most-hit sectors to the overall drop, but also suggested that the negative reaction has been rather broad-based. The sectors most hit by the pandemic and quarantine were, as expected, hotels and restaurants (-56.9% YoY output drop in 2Q20), entertainment, sports, and recreation (-28.0% YoY), and other services (-28.6% YoY). Due to the low share of those in the overall GDP structure, however, they contributed only 0.9 percentage points out of the total 8.0% YoY GDP drop. Since the de-facto quarantine has been eased throughout 3Q20, these sectors should be seeing a rebound, however it is also unlikely to play a major role in the improvement in the overall GDP trend. The primary contributors to the 2Q20 drop were industrial production (-2.1ppt), trade (-1.7ppt), transport and communication (-1.3ppt), caused by a combination of reduced foreign trade and local quarantines. Russia`s continued compliance with OPEC+ commitments and reduced travel should restrain the recovery in industrial production, wholesale trade, and transportation at least until the year-end.