Page 59 - BNE_magazine_11_2019

bne November 2019 New Europe in Numbers I 59
September's round of statistics bring some surprisingly good results – almost too good
IntelliNews Pro
Rosstat's data release on October
17 provided analysts with a few surprises ahead of the next Central Bank of Russia (CBR) monetary policy meeting, leading some to speculate about another rate cut, while others worried that the state statistics agency is cooking the books to provide some badly needed good news.
Amongst the surprises were:
• the expansion in construction
accelerated to +0.8% y/y after almost
three quarters of zero growth;
• real disposable incomes expanded
+3.0% y/y in 3Q19;
• the downward revision of real wage
growth for August still left a healthy +2.4% y/y.
Economic activity likely accelerated somewhat in September and 3Q19, according to Sberbank CIB. The performance in most sectors improved in September, with retail turnover being the one really important sector to see
a slight fall.
Agricultural output growth accelerated the most, by 5.6% y/y in September versus 3.4% in August.
“Growth in agricultural output put the 3Q19 figure at a solid 5.1% (versus 1.2% in 2Q19) and 3.6% in 9m19. This was likely attributable to a low base from the previous year (down 4.7% in 3Q18) as we pointed out in our previous note), though the low-base effect should fade away in 4Q19. Still, this will remain a supportive factor,” according to Sberbank CIB.
Industrial output growth edged up to 3.0% y/y in September, versus 2.9% in August, while the decrease in transportation eased to 0.2% from
a 0.6% drop in August.
The economic dynamics in 3Q19 likely improved versus 2Q19 and 1H19.
“In 3Q19, we observed better dynamics in agriculture, construction, and
wholesale trade (based on July-August data), while industrial output growth remained almost the same. Retail sales and transportation dynamics worsened in 3Q19,” Sberbank CIB said.
Construction has been in the basement for several years, but in September it grew +0.8 y/y after +0.3% y/y in August. Construction was contracting for all the crisis years of 2014-2017, but picked
up sharply in 2018, only to fade away to next to nothing in 2019.
“Government spending likely fed through to better construction activity. The growth in construction was likely attributable to increased government expenditures related to infrastructure part of the "national projects," Sberbank CIB said. “Construction could improve further in 4Q19 due to further growth of government expenditures
on infrastructure. Solid growth in the output of construction materials may also indicate some improvement in construction output that has not yet shown up in the statistics, given that construction companies only report
Russia construction volume y/y %
data to the State Statistics Service at the end of the year.”
The growth rate of construction in September was a welcome relief, but still remains well below what would constitute a “recovery” in the sector.
However, Alexander Isakov, chief economist at VTB Capital, believes there is something wrong with the reporting and the headline construction expansion rate is not consistent with the observed average growth in construction materials (i.e. non-metallic mineral products were up +5.5% y/y).
Constricution statistics have already provided some surprises as it was a sharp revision of construction statistics last year from near zero to over 5% that led to Rosstat reporting the surprisingly strong 2.8% GDP growth in 2018.
Now Isakov is expecting a similar upwards revision. “Thus, we expect
a considerable upward revision to the value of construction works completed for 2019 as a whole,” he said.
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