Page 34 - RusRPTNov18

fastest in over a year.
“Nevertheless, pre-production inventories continued to contract strongly in October as firms reportedly used current stocks in production,” Markit reports.
With the tide lifting all the boats, business confidence remained strongly optimistic in October , according to Markit’s panelists, with manufacturing firms signalling the second highest degree of confidence since May 2015. A number of survey respondents suggested new product development helped drive output expectations.
That result does not tally with Rosstat’s business confidence survey that saw confidence fall heavily in September to -5 from -3 in August and -2 where it has been for the previous five months.
Likewise, consumer confidence has been sinking with the Rosstat’s consumer confidence index tumbling to -14 from -8 the previous two months. Consumer demand remains soggy as despite growing nominal and real wages, price increases have eaten up a lot of the gains and the all important real disposable income (the money that is left after food and utility payments) went positive at the start of the year but since then has fallen back to close to zero as of August.
Another factor holding back industrial expansion is the high cost of borrowing. The Central Bank of Russia (CBR) ended its loosening cycle in September with a surprise 25bp rate hike, that front loaded monetary policy in the face of fears of new “crushing” sanctions that may be imposed by the US this autumn.
Faced with a lot of uncertainty over the rest of the year, the government is running an extremely conservative policy at the moment. Another way the state could boost growth is to ease the terms of the so-called budget rule that sends any excess oil tax revenues over $40 to the national welfare fund. Former Finance Minister and co-head of the presidential council Alexei Kudrin has called for the rule to be relaxed and the bar raised to $45 on the back of the current $75 price for a barrel of oil, however the liberals in charge of policy have so far refused preferring to prepare for a possible crisis rather than chase growth.
34 RUSSIA Country Report November 2018 www.intellinews.com