Page 43 - RusRPTNov21

momentum to fade in the fourth quarter of 2021 and 1H22 as consumption stabilizes following the spending of excess savings and slower loan growth due to higher interest rates, although social disbursements could delay this process for a month or so. We see a risk that our FY21 GDP growth forecast of 4.8% y/y drops to 4.5% y/y due to worse-than-excepted prints.
Production is gradually returning to pre-COVID-19 levels as the low base effects fade. Industrial production (IP) slowed to 4.7% y/y in August vs. 7.2% y/y in July, 10.2% y/y in June and 11.9% y/y in May. All sectors showed a y/y moderation, such as mining and quarrying (6.4% y/y in August vs. 12% y/y in July), manufacturing (3.1% y/y in August vs. 3.7% y/y in July), electricity, gas steam and AC supply (6.8% y/y in August vs. 8.1% y/y in July), and water supply and sewerage (17.9% y/y in August vs. 33.5% y/y in July). As a result, IP was just 0.5% higher than in August 2019.
On a SA MoM basis, IP moderated further and was down 0.8% SA MoM in August after contracting 0.1% SA MoM in July and 0.3% SA MoM in June due to weaker manufacturing (-1.2% SA MoM in August vs. -0.6% SA MoM in July and -0.1% SA MoM in June). Apparel leather and leather products, computers and electronics, motor vehicles, and other transportation equipment were the worst performers.
In other industries, weather conditions and supply disruptions resulted in a 10.1% y/y decline in agricultural production. The transportation segment was up 5.9% y/y in August vs. 9.3% y/y in July (-0.5% SA MoM), while construction slowed to 6.2% y/y in August vs. 9.3% y/y in July following a slowdown in residential housing construction to 25% y/y in August vs. 29% y/y in July. Wholesale trade bounced back to 9.1% y/y in August vs. 3.9% y/y in July (1.9% SA MoM). Mortgage lending was up 27.7% y/y in August vs. 28.6% y/y in July and 27.2% y/y in the second quarter of 2021.
On the investment front, fixed asset investments in the second quarter of 2021 were up 11% y/y, up 5.1% vs. 2Q19 thanks to stronger profit generation (+44% vs. 1H19 and +2.6x vs. 1H20) and the expansion in the loan portfolio (9.6% y/y in August vs. 9.8% y/y in July and 8.9% y/y in the second quarter of 2021).
Goods sales remain strong, but services see weakness. Retail sales (5.3% y/y) did not decelerate following higher non-food sales (7.5% y/y) compared to food sales (2.8% y/y). The headline print appeared to be better than market expectations. On a SA MoM basis, non-food sales (0.9% SA MoM) supported the headline (0.6% SA MoM), while the food segment saw a contraction (-0.1% SA MoM). At the same time, market services and public catering weakened further on a SA MoM basis (-0.7% SA MoM in August vs. -1.6% y/y in July and -2.2% SA MoM in August vs. -1.7% SA MoM in July, respectively).
The recovery in incomes stumbled, while retail lending was strong. The growth in real wages slowed in July to 2.2% y/y vs. the expected rate of 2.6% y/y, although the dynamics remained positive on a SA MoM basis (0.7%). The unemployment rate remained at post-pandemic lows of 4.4% SA in August vs. 4.4% SA in July and 4.7% SA in June. Retail loan growth accelerated to 16.9% y/y in August vs. 16.2% y/y in July and 13.7% y/y in the second quarter of 2021.
43 RUSSIA Country Report November 2021 www.intellinews.com