Page 34 - RusRPTNov20

2019, with major changes seen in the data from March-August of this year. The decline in IP over March-July was revised from 6.7% YoY to 4.5% YoY, while the revision in August eased the decline from 7.2% YoY to 5% YoY. Manufacturing has seen a major improvement, up 2-4.5ppts YoY every month, while the improvement in mining has not been as significant (c. 1ppts YoY). Rossat reasoned that the changes were the result of more detailed data coming from respondents on a monthly basis, as well as its greater contact with SMEs, which are examined on a quarterly basis in comparison to individual entrepreneurs, who are examined annually. The better performance in August was attributed to chemical production, medicines, medical equipment and transportation vehicles.
...​limits the economy’s recovery potential​. When looking at the revised dynamics, the recovery in IP slowed in September (-5% YoY vs. -4.2% YoY in August and -5.9% YoY in July). The momentum weakened as manufacturing recovered more slowly, dropping 1.6% YoY in September after improving 0.4% YoY in August. Mining and quarrying remained under the overhang of OPEC+ production cuts (-10% YoY in September vs. -10.6% YoY in August). At the same time, transportation volumes improved (-3.4% YoY in September vs. -4.9% YoY in previous months) thanks to higher pipeline transportation volumes. Construction improved (-0.1% YoY in September vs. -0.6% YoY in August) as residential floor space completions accelerated to 12.3% YoY in September. Growth rates in agriculture soured in September, only rising 1.4% YoY vs. 4.1-4.2% YoY in July-August.
Household consumption stabilizes​. Retail sales (-3% YoY in September vs. -2.7% YoY in August and -1.9% YoY in July) stopped improving due to the worsening situation with COVID-19. The deterioration came on the back of lower food consumption (-4.6% YoY in September vs. -4.1% YoY in August and -2% YoY in July) while non-food sales remained close to previous levels (-1.3% YoY). At the same time, car sales turned positive again (+3% YoY) for the first time since March. There was significant improvement in the consumption of market services (-12.2% YoY vs. -18.8% YoY in August and -23.3% YoY in July). In our view, such consumer behavior points to a reshuffling in the consumption structure as people consume more services, while delayed purchases are starting to materialize.
Income, employment and credit activity​. Disposable income in 3Q20 (-4.8% YoY vs. -8.4% YoY in 2Q20) moderated the decline as well. Real wages stopped improving in August but remained positive, up 0.1% YoY vs. 2.9% YoY in July. The unemployment rate eased from 6.4% in August to 6.3% in September on an NSA basis (6.7% to 6.5% on an SA basis). Lower interest rates and subsidies continued to boost retail lending (+13.6% YoY in September vs. +13.3% YoY in August, or +1.5% MoM on an SA basis). Housing loans and mortgages were the major drivers, with the latter continuing to beat monthly records, recording RUB 500bn in September and RUB 375bn
34 ​RUSSIA Country Report​ November 2020 www.intellinews.com