RosStat’s report on July 2013 base sectors and other fundamental indicators shows the continuation of the negative trend seen in H1/13. However, the retail trade is gaining for the second month in a row supported by declining unemployment. Another positive factor is construction and agriculture gaining due to base effect.
Capital investment dynamics continued to be unstable with a negative direction: after shrinking by 3.7% y/y in July investment picked up by 2.5% y/y but declined by 6% m/m. In Jan-July overall, investment declined by 0.7% y/y (down by 1.4% y/y in H1/13). Bloomberg analyst survey forecasted a 1.4% y/y decline of investment in July. EconMin currently sees investment growth of 4.6% y/y in 2013, but the forecast is likely to be revised to 3% y/y (6.7% y/y growth seen in 2012 vs. 9% EconMin’s forecast).
Construction gained 6.1% y/y in July after declining by 7% y/y in the previous month. This is likely to be attributed to a base effect as for the same month of last year construction decreased by 3.2% y/y. Strong agriculture performance due to good crops was expected, but it was also accelerated by a base effect. Agriculture gained 5.8% y/y in July vs. 2.1% y/y growth seen in June.
At the same time industrial output was weak in the reporting month, declining by 0.7% y/y in July. Transportation data supports weak industry: transportation declined by 1.1% y/y in July, the decline accelerating as compared to June’s -0.7% y/y. Railway transportation declined by 2.6% y/y in the reporting month of July.
The strongest performance in July was showed by the retail trade, which provides some resilience to otherwise weak base sectors. Retail trade gained 4.3% y/y in July vs. 3.5% y/y seen in June and 2.9% y/y in May. Analysts surveyed by Bloomberg expect retail trade to increase by 3.7% in July. The retail sales were supported by slower inflation (down to 6.5% y/y in July), lower unemployment (down to 5.3%), and continuous real income growth (real disposable income up by 4.2% y/y in July). Unemployment and income growth also exceeded the expectations of analysts: 5.5% and 3.6% y/y forecast in Bloomberg analyst survey.
To remind, the EconMin did not revise the forecast of 2.4% GDP growth for 2013 despite weak Q2 results published by RosStat last week. Q2/13 GDP growth was reported at 1.2% y/y vs. 1.9% y/y expected by EconMin and 2% by the analysts. EconMin Alexei Ulyukaev commented that risk of recession is still there and that economic policies will have to react accordingly. The EconMin hopes to mitigate the risks of recession H2/13 due to a favourable base effect, good agriculture performance, and weaker RUB.
At the same time in the monetary and credit policy report of the Central Bank of Russia (CBR) GDP growth of 2% is expected in 2013. This is below the 2.4% forecast of EconMin. The CBR sees a moderate output gap (actual output being below potential) maintained in 2013. Economic growth was limited by oil prices and low external demand and activity in the Eurozone are not expected to stimulate Russia economy in the short-term, the CBR believes.
|Base Industries (%, y/y)||2009||2010||2011||2012||Dec-12||Jan-13||June||July|
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