Page 7 - RusRPTSept21

industries, only metal processing was lower in the second quarter than two years earlier. On the other hand, however, growth in the processing industry has leveled off this year, and seasonally adjusted output has declined over the past couple of months. The seasonally adjusted Purchasing Managers ’Index (PMI) for the manufacturing industry fell markedly in July after a good couple of months. According to the survey, the background is a decrease in production and new orders. Also in Rosstat's business survey, the production and order outlook for the processing industry remained rather bleak in July.
Retail sales in the second quarter were 5% higher than two years ago and now less than 5% lower than in the second quarter of 2014, when retail was at its highest levels in 2010. However, seasonally adjusted sales have increased rather slowly in recent months. Services provided to households (excluding government services) continued to recover in the second quarter and were now relatively slightly lower than two years ago. Consumers' expectations of the state of their own finances over the next year have been reasonable in Rosstat's quarterly survey this year and quite good in the Russian Central Bank's monthly survey. However, according to a central bank survey, expectations fell sharply in July.
The recovery in consumption has not come so much from real household disposable income, which in the second quarter was still less than one% lower than two years earlier. Consumption this year has been strengthened by the fact that net household savings have been very low compared to last year's recession as well as in 2019. Including net savings, net household borrowing from banks has increased in recent months. The number of employed returned to almost two years ago in the second quarter.
Wholesale trade has recovered at the pace of 10% more in the second quarter than two years earlier. Construction has clearly increased over the past two years. The volume of freight transport (including pipeline transport of oil, petroleum products and natural gas) grew slightly higher than two years ago.
Inflation remains the biggest problem and was running at 6.5% in June
despite a string of rate hikes by the CBR: March (25bp), April (50bp), June (50bp) and July (100bp).
The inflationary pressures are going to remain after Russian President Vladimir Putin announced several one off payments to pensioners and military personal in the lead up to September’s general election.
Analysts are expecting another rate hike of at least 25bp in September as a result of Putin’s largess, and 50bp is more likely, given CBR governor Elvira Nabiullina’s ultra conservative approach. She worries that inflation expectations of the population have become unanchored and are running at
7 RUSSIA Country Report September 2021 www.intellinews.com