Russian Consumers Running Out Of Steam While Producers Outperform

Russian activity and banking data for November confirm the deterioration of consumer sentiment but producers seem to have become more upbeat. With limited room for further fiscal and monetary support, GDP recovery prospects for 2021 appear modest.

People wearing masks as a preventative measure against Covid-19 in Moscow, Russia Source: Shutterstock

A hiccup in consumer recovery?

Retail trade in Russia dropped to -3.1% year-on-year in November following the 1-2% YoY drop seen between July- October. Although these numbers are better than our expectations and consensus, they still point towards a hiccup in consumer recovery.

The substantial drop took place amid accelerating CPI, mainly due to higher food prices and a slowdown in nominal and real salary growth despite falling unemployment.  

We are particularly concerned that banking sector data shows a continued slow down in retail deposit growth to 5.6% YoY (net of FX revaluation) in November from 6-7% in October, while retail lending growth also continues to slow down after a brief spike in October, but remains in double-digits. This suggests that a deterioration in consumption is taking place amid a declining savings rate and partly explains the recent announcement of additional social support measures.

For 2021, we remain cautious about household activity and ahead of parliamentary elections will be closely watching social support measures and the inflation trajectory.

Consumer recovery stalls in November

Source: Bank of Russia, Rosstat, ING 

Producer trend shows a noticeable recovery

On the positive side, the producer trend showed a noticeable recovery, especially on the industrial output side, with the drop narrowing materially from -5.5% YoY in October to -2.6% YoY in November.

The banking sector data also seems positive at first glance, with corporate loan growth continuing to increase in November despite the active placement of the government bonds, but we have two reservations.

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