Page 24 - RusRPTSept20

macro targets is justified, but note that especially the data on real income recovery is volatile.
In July all but one of Russia’s major segments of real economy posted improvements, according to the monthly report from Rosstat.
The only laggard was industry where deep cuts in oil and gas production pushed overall industrial output down 8% y/y. At the same time, performance in other sectors was either stable or growing: gains in agricultural output accelerated to 4% y/y from 3% y/y in June, construction volumes remained stagnant at -0.2% y/y and volumes of cargo turnover posted some improvement (-8.4% y/y v -9.6% y/y in June).
Fixed investment fell 4% y/y in 1H20, which implies a contraction of c9% y/y in 2Q20.
The consumer sector was also starting to come back to life, albeit slowly. In July the situation in the consumer segment remained gloomy, but slightly better than in June: retail sales declined by 2.6% y/y (-7.7% y/y in June), volumes of paid services fell by 25.5% y/y (-34.5% in June), contraction in volumes of housing construction deepened to -14.9% y/y from -6.4% a month earlier and the unemployment rate rose to 6.3% from 6.2% in June.
“The only bright spot was the dynamic of real wages, which in June grew by 0.6% y/y and by an impressive 2.9% y/y in 1H20 – but this data covers only large and midsize companies and therefore omits the sectors that were most heavily hit by the crisis, like SMEs,” BSC Global Markets chief economist Vladimir Tikhomirov.
To a large extent, Rosstat’s July report has shown the same picture of the economy as previous statistics: the Russian economy is slowly recovering, but the pace is quite different in the real economy and in the consumer sector.
If one excludes huge falls in output in the oil and gas sector that were driven by production cuts due to weak demand for gas after a warm winter and limits on crude oil output imposed by the OPEC+ deal, then the situation in the real economy remains quite stable with average level of contraction at around 3% y/y, according to BCS GM estimates.
At the same time, in the consumer sector, the story is different with falls in output often exceeding 10% y/y. Even strong recovery in volumes of retail sales seen in July could be hard to sustain: early indicators show that, in August, Russian consumers started to switch back to the saving model of behaviour.
“Overall, we see this latest data as confirming our view on future macro trends; we reiterate our FY20 GDP growth forecast at -3.8% y/y,” said Tikhomirov.
24 RUSSIA Country Report September 2020 www.intellinews.com