Russian Activity Exceeds Expectations In April

Russian retail trade posted a 34.7% YoY jump in April, mostly on base effect, but also supported by higher employment and income, as well as acceleration in retail lending and still positive budget expenditure growth. Producer activity also exceeded expectations, creating upside to our full-year projections and supporting central bank hawkishness.

Shopping mall in St. Petersburg, Russia

Consumption growth surprised on the upside

The annual St. Petersburg International Economic Forum ended on a positive note, thanks to Rosstat. Retail trade was reported up 34.7% year-on-year, exceeding our and consensus expectations. While such a large number is obviously assured mainly by the low base effect (in April 2020, the first quarantine month, retail trade was down 22.0% YoY), the result is still positive. First, it suggests that the April 2021 retail trade is 5.1% higher than in April 2019. Second, part of the recent strong results reflect real improvement in the underlying trends.

  • Labour market conditions improved (Figure 1), with unemployment down from 5.4% to 5.2% and the number of officially employed up to 71.2 million, close to the pre-Covid March 2020 level of 71.4 million. Real salary growth (reported with a lag for March 2021) remained strong at 1.8% YoY, also exceeding expectations.
  • With extended limitations for outward tourism to popular destinations, including Turkey and Egypt, the local retail trade appears well supported at least till June. This led to increased reliance on imports. According to preliminary customs data, the non-CIS imports (covering around 90% of Russia's total imports) were up 49% YoY in April and 39% YoY in May, with food imports growing 15-20% YoY, electronics by 40-50% YoY and vehicles by 140% YoY.
  • The role of the banking sector in funding the consumer activity also seems to have increased (Figure 2), as retail lending picked up to 20% YoY, back to growth rates seen in 4Q19, prior to Covid. Recent indications by the Bank of Russia suggests that the acceleration seen in the recent months is driven by consumer lending. Retail deposit growth also recovered, but very modestly to 4.4% YoY in April (net of FX revaluation effects), which is still close to historical lows.
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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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