Cistran Finance Exploring the Spirit of Capitalism's New Frontier

Sunday, August 25, 2019

Domestic demand in Russia slows in July

Local demand in Russia nearly came to a standstill in July, according to economic data released by Rosstat on Wednesday.

"Local demand almost came to a full stop, and there is little to prevent it from dipping below the waterline in [the third quarter]," VTB Capital analysts Daria Isakova and Vladimir Kolychev said.

The statistics showed unemployment stood at 4.9 percent for the second consecutive month, fixed capital investments declined 2.0 percent year-over-year, retail sales were up 1.1 percent, new housing construction rose by 38.5 percent, real wages edged up 1.8 percent and agricultural exports increased by 8.5 percent.

"Consumer spending is firmly on the downward trend," Isakova and Kolychev said. "The pace of annual growth in real retail sales is hovering near 4.5-year lows... restrained by... lackluster incomes growth and... tightening access to consumer credit. There is no short-term cure for [either] of the two and, moreover, elevated and rising food inflation will continue to eat into households' spending power. Component-wise, spending on big ticket items, such as car sales was particularly affected."

They also said that investment is back in the red with companies pressured to save and deleverage given political uncertainty and more difficult borrowing conditions.

"Net exports cushion impact on economy," Isakova and Kolychev said. "[They will] unlikely... be strong enough to keep GDP growth from dipping under water in [the second half of 2014], particularly in light of the unfavorable statistical base effect."