20 Mar 2015
Russia: Domestic demand down further– ING
FXStreet (Barcelona) - Dmitry Polevoy of ING Bank, reviews the domestic demand data of Russia, noting that the deterioration in private consumption and falling investments confirms that CBR’s focus on GDP risks is justified.
Key Quotes
“Domestic demand data for Feb-15 was mostly disappointing with real wages falling by 9.9% YoY (consensus: -8.8%, INGF: -9%), retail sales shrinking by 7.7% (consensus: - 5.8%, INGF: -6.2%) and unemployment rising to 5.8% (consensus :5.7%, INGF: 5.8%) with fixed capital investment losing 6.5% (consensus: -8.1%, INGF: -9.8%).”
“Also, producer prices gained 2.1% MoM/9.5% YoY (consensus: 1.1%/8.6%, INGF: 2.4%/9.8%), while the growth in the core manufacturing sector was down to 2.8% MoM from 3.3% in Jan-15, even if further accelerating in annual terms from 11.8% YoY to 14.4%.”
“According to our estimates, the drop in private consumption nearly doubled to 6.2% vs 3.2% in Jan15, while overall domestic demand contracted by 6.3% in Feb-15, vs 3.8% a month ago.”
“So, economic activity continued weakening at a rapid pace, and only net exports could have been partly offsetting the effect on the headline GDP.”
“Manufacturing surveys have shown weakening price pressure on the producer side, so PPI dynamics should be better going forward which, together with moderating WoW/MoM CPI growth, fully justifies the CBR focus on GDP risks in its policy setting.”
“We reiterate our view of its key rate falling to 12% in 2Q15 and 9% by 2015-end.”
Key Quotes
“Domestic demand data for Feb-15 was mostly disappointing with real wages falling by 9.9% YoY (consensus: -8.8%, INGF: -9%), retail sales shrinking by 7.7% (consensus: - 5.8%, INGF: -6.2%) and unemployment rising to 5.8% (consensus :5.7%, INGF: 5.8%) with fixed capital investment losing 6.5% (consensus: -8.1%, INGF: -9.8%).”
“Also, producer prices gained 2.1% MoM/9.5% YoY (consensus: 1.1%/8.6%, INGF: 2.4%/9.8%), while the growth in the core manufacturing sector was down to 2.8% MoM from 3.3% in Jan-15, even if further accelerating in annual terms from 11.8% YoY to 14.4%.”
“According to our estimates, the drop in private consumption nearly doubled to 6.2% vs 3.2% in Jan15, while overall domestic demand contracted by 6.3% in Feb-15, vs 3.8% a month ago.”
“So, economic activity continued weakening at a rapid pace, and only net exports could have been partly offsetting the effect on the headline GDP.”
“Manufacturing surveys have shown weakening price pressure on the producer side, so PPI dynamics should be better going forward which, together with moderating WoW/MoM CPI growth, fully justifies the CBR focus on GDP risks in its policy setting.”
“We reiterate our view of its key rate falling to 12% in 2Q15 and 9% by 2015-end.”