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March 23, 2018 www.intellinews.com I Page 12
But this has not fed through into retail turnover and the foot traffic at the top malls in Moscow has also fallen, according to the Watcom Shopping index. That is despite a steady recovery in real incomes and now in real disposable incomes as well. Retail lending accelerated to 14.6% y/y in February while corporate lending sputtered.
“Retail lending trends remained strong in February, posting a 14.6% y/y increase, or 0.9% m/m growth. The continuing increase
in borrowing is an additional driver for consumption, which we expect to strengthen in the coming months,” said Natalia Orlova, chief economist at Alfa Bank, said in a note.
“At the same time, the corporate lending picture is mixed: it looks like the strong demand for ruble-denominated loans, which appeared from the third quarter of 2017, has evaporated or at best paused, in February, which may indicate that the spike was just related to sanctions fears. However, it may also be due to weak industrial production growth.”
But the effects are likely to be temporary
as February’s batch of data also showed a further tightening of the labour market as unemployment fell to 5% from 5.2%, “which should feed through into stronger retail spending,” said Capital Economics.
“The seasonally-adjusted unemployment rate edged down from 5.2% to 5.0% – the lowest rate since March 2014. And real disposable income
growth jumped to 4.4% y/y last month, having been flat in year-on-year terms in January (the consensus was for a fall of 0.1% y/y),” the consultancy said in a note.
Predictably public sector wages registered the impact of the presidential elections with a big spike in wages, which probably accounts for the jump in disposable wages.
“Budget figures point to 47% y/y expenditure growth in healthcare, education and national economy in 2M18: the indexation of public- sector salaries prior to the presidential elections looks to be the most likely explanation for the substantial boost in salaries,” said Orlova. Rosstat reported a 28% y/y increase in nominal salaries in healthcare (vs. just 9% y/y growth
in 2017) and an 18% y/y increase in nominal salaries in education (vs. 7% y/y salary growth in 2017) for January.
“The federal budget statistics confirms this generous spending: healthcare expenditures increased 63% y/y in 2M18, education spending rose 36% y/y for the same period, and spending in the national economy jumped 53% y/y.
For 2M18, total federal budget expenditures grew 8% y/y (excluding one-off payments
to pensioners in January 2017). The strong acceleration in expenditure growth contradicts MinFin guidance of 1% y/y spending growth for full-year 2018; we see public sector salary growth posing a challenge for budget stability this year,” concluded Orlova.