The Lastest Macroeconomic News
06.09.2020 13:16 Russian EconMin said to improve 2020 outlook
The revised fiscal outlook prepared by Russia`s Ministry of Economic Development for September might include a notable upward revision of GDP forecasts from the previous 5% recession to a 3.9% recession expected in 2020, Kommersant daily reports on August 31 citing unnamed sources. Reportedly, the ministry is encouraged by the faster-than-expected recovery of domestic demand in summer 2020, as well as other economic indicators in 2Q20. As a result, investment is also expected to shrink only by 6.6% in 2020 versus the previous 12% decline expectations. The ministry also reportedly expects GDP to recover to pre-crisis levels by 3Q21. Analysts surveyed by Kommersant daily believe that the upward revision of 2020 macro targets is justified, but note that especially the data on real income recovery is volatile.
06.09.2020 11:59 Russia`s manufacturing PMI back in the black, rising to 51.1 in August
Russia`s manufacturing PMI was back in the black, rising to 51.1 in August from the mild contraction of 48.4 in July and completing the recovery from the index`s total collapse in the second quarter due to the coronacrisis. The manufacturing index crashed to an all-time low of 31.1 in April as the impact of the lockdown of the Russian economy due to the epidemic took hold, according to IHS Markit, which produces the index. The return to manufacturing expansion – a result above the 50 no-change mark represents growth – is the first gain in over a year and the last of the three indicators to return to the black. Russia`s services PMI bounced back to 58.5 in July, which pulled up the composite index to 56.8 in the same month, despite the mild contraction in manufacturing. The recovery in the manufacturing PMI is not yet reflected in the industrial production index, which was down by 8% in July, but here too the rate of contraction is slowing from -9.4% in June and -9.6% in May. Bank of Finland Institute for Economies in Transition (BOFIT) reports that in some sectors – most notably agriculture – production has already recovered and is now above its pre-crisis norms; however, retail sales have fallen in all of Russia`s regions except Chukotka.
05.09.2020 12:17 Russia: CPI higher than consensus in August
The lack of monthly deflation in August confirms our take that the pick-up in CPI – to 3.6% YoY currently – is caused not only by the low base effect, but also by RUB depreciation, higher agriculture prices and a lack of demand constraints. Higher CPI combined with increased market volatility are strengthening the case for an unchanged key rate this month. Russian CPI showed no monthly deflation in August despite seasonality, and the annual CPI rate picked up by another 0.2 percentage points (pp) to 3.6% year on year. This result is in line with expectations, however analysts were on the hawkish side of the consensus range, with most of the market participants expecting 3.4-3.5% YoY. We take the numbers as supportive of our initial take, that the reasons for the acceleration in the CPI, which is likely to take place in 2H20 and in the beginning of 2021, go beyond the statistical base effect.
16.08.2020 13:13 Russia`s GDP fell by 8.5% in 2Q20 due the lockdown quarantine measures
Russia`s GDP fell by 8.5% in 2Q20 due the lockdown quarantine measures imposed across the country reeling from the coronacrisis. The second quarter of the year took the full brunt of the crisis as many industries were shuttered by the restrictive measures in connection with the coronavirus (COVID-19) pandemic. However, the fall was not quite as bad as the corresponding falls in GDP during the previous 1998 and 2009 crises. The decline in GDP in the second quarter, according to preliminary estimates, amounted to 8.5% year on year after growing by 1.6% in the first quarter, according to Rosstat. Rosstat data turned out to be better than the previous predictions from the Ministry of Economic Development, which estimated the drop in GDP in the second quarter at 9.6%, and better than the Central Bank`s (CBR) expectations of a decline of 9-10%. The "quarantine quarter” performed better than the crisis in 1998, where the most significant decline was recorded in the fourth quarter of 9.1%, and during the global financial crisis a decade later, where the second quarter was also the worst of the year with a drop of 11.2%. All of Russia`s sectors contracted with the exception of agriculture. The maximum drops were noted in the commodity sector, retail trade, passenger transportation, as well as in industries related to the provision of services to the population. The least affected sectors were manufacturing, construction, wholesale and cargo transportation, as well as in the provision of electricity, gas and steam and air conditioning.
24.07.2020 10:59 Russia: Consumption shows improvement, but income trend uncertain
The retail trade drop narrowed in June, possibly supported by the lack of international travel. Income fundamentals appear solid at first glance but mask a higher share of grey income and increased dependence on state support. Russian retail trade drop narrowed from -19.2% year-on-year in May to -7.7% YoY in June, outperforming the consensus forecast of -11.0% and our -11.5% expectations. The improvement was seen in both the food and non-food retail segments, and support factors include the wide lifting of lockdowns ahead of the constitutional voting in the last week of June, combined with persistent foreign travel restrictions. The latter may soon be somewhat relaxed to a limited extent, which means that local consumption may continue to see some boost during the summer months. In 3Q last year Russians spent US$16.5bn on foreign travel, which means that this quarter the consumption of goods and services might receive around a 5-10% boost
17.07.2020 18:23 Russia: Industry still sluggish, signals weak investment trend
Russian industrial output dropped in June due to the sluggish performance in intermediary and investment sectors. With fiscal priorities shifting towards social spending, consumer demand-driven sectors are less of a concern in the near term. Manufacturing sector underperforms despite favorable calendar effect and recovery in consumer-driven sectors. Russian industrial production dropped 9.4% year-on-year in June, showing little improvement vs. the 9.6% YoY drop in May. The June result is worse than the -7.2% consensus and is even further away from our more optimistic expectations of -6.0%. The negative result comes despite the favorable calendar effect. Even accounting for the extra day-off, the number of working days in June 2020 was still exceeded by that of June 2019 by 1 day, while the calendar effect for May was exactly the opposite. July and August will be facing adverse calendar effects of 1 lost working day each. The June 14.2% YoY drop in commodity extraction (after -13.5% YoY in May) contributed to the overall performance, however, it was not a surprise given Russia`s OPEC+ commitments, which persist in the current form until August, when some relaxation seems to have been agreed upon recently.
12.07.2020 19:23 Russia: Near-term inflationary risks appear low
Russian CPI accelerated in June, mainly on the base effect. Meanwhile, stabilization of global agriculture, commodity, and FX markets, along with extended limitations on foreign travel, lowers the risk of CPI hitting the 4.0% target this year. Russian inflation accelerated from 3.0% year-on-year in May to 3.2% YoY in June, slightly below our expectations and in line with the consensus forecast. The key reason for this pick-up is due to the low base effect of June 2019 (caused by the freeze in gasoline prices and other temporary factors). In monthly terms, CPI actually decelerated from 0.3% month-on-month in May to 0.2% MoM in June, which is below the 0.4-0.6% MoM seen in June 2016-18. The disinflationary trend observed throughout 2H19 and early 2020 (annual CPI decelerated from 4.7% YoY in June 2019 to 2.3% YoY in February 2020) suggests that the statistical low base effect will remain until 1Q21, optically pushing the annual CPI rates higher despite contained monthly rates.
19.06.2020 19:33 Russia`s Economy Ministry releases fresh forecasts for 2020
Russia`s Ministry of Economy has released a fresh forecast for 2019-2022. The ministry said there will be no V-shaped recovery: after a 5% plunge in 2020, real GDP will only recover starting in mid-2022. The Ministry of Economy predicts GDP growth of 2.8% in 2021 and 3% in 2022. The Urals price stays below the base budget price of $42, at which point the Russian budget breaks even. Urals will average $31.1 per barrel this year, rising to $35.4 in 2021 and only in 2022 will it return to the breakeven price of $42.2 when Russia Inc. goes back into profit. That means the Ministry of Finance will rely on the National Welfare Fund (NWF) to top up budget spending until 2023. Currently there are some RUB9 trillion ($130bn) of liquid assets in the NWF. With an estimated RUB3 trillion shortfall in budget revenues forecast for this year there is therefore enough in the NWF to cover at least another three years of deficits. The ministry also says the ruble will remain relatively strong over the period.
12.06.2020 22:00 Russian government spending on national projects runs low, but 2H20 should see boost
The coronacrisis has knocked back work on Russia`s 12 national projects, causing further interruptions after the programme was plagued by delays in the first half of last year as well. Over the first five months of this year federal spending on the projects was only 28.9% of the annual plan. The programme is existential for the government of Russian President Vladimir Putin, as trust in the president falls after over six years of real income stagnation. Since 2012, the Kremlin has diverted all its resources into modernising the military, sacrificing the growing prosperity the people had been enjoying. But as that goal has largely been achieved since about 2018 the Kremlin has turned its attention back to improving the quality of life of regular Russians in anticipation of growing social disapproval of Putin and his government in the coming years. The national projects are the manifestation of that plan, but got off to a slow start last year and now have been side-tracked by the double oil price and coronavirus shocks. At the same time, the government is keen to get the plans running, as they contain significant spending on infrastructure projects (a third of the total) that will provide a very useful Keynesian boost to the flagging Russian economy, and most of these projects already have funding assigned to them under the current budget.
22.05.2020 12:23 Industrial output in Russia shrank 6.6% in April
Russia`s industrial output fell by 6.6 percent in April compared to the previous year, dampened by the country`s coronavirus lockdown, the state statistics agency said Thursday. Russia imposed a “non-working” period across the country at the end of April which “served as the decisive factor in lowering industrial output,” Rosstat said in a statement. Industries were delivered a double blow as President Vladimir Putin ordered companies to stop work activities but continue paying salaries. At the same time, “consumer demand fell for a range of goods and services,” the agency said. However it reported a surge in demand for some products, including food, household products and laptops, sought as people began telecommuting. Russia`s commodities sector only decreased by 3.2 percent year on year, and oil production actually grew by 0.2 percent, the agency said, noting that for many of those companies ceasing activity was not possible. Pharmaceutical industries showed growth of 13.5 percent year on year, while the automotive sector was the worst-hit, plummeting by 79.2 percent.