Banks’ lending expands in July across the board pointing to a recovery in economic activity

RUSSIA ECONOMICS - In Brief 31 Aug 2022 by Alexander Kudrin

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Ассоrding to statistics recently published by the CBR, banks provided more loans to the economy in July than in any previous month since March. From March, outstanding credit to other financial and non-financial organizations contracted, while in July, it resumed growth. Total credit grew by 2.7% m-o-m. The consumer credit expanded by slightly above 1.0% m-o-m (by R278 bn), which was well in line with our estimate made yesterday in the brief note of this series. CBR also reported that household deposits grew by 1.2% (excluding escrow accounts that remained relatively unchanged). These are ruble credits and deposits, and they now dominate in Russia. Credits, deposits, and other accounts in FX, are now much smaller in size and were very volatile in recent months amid the ruble’s volatility. Hence statistics on the ruble segment of the money is a more representative indication of the country’s economic activity. CBR’s recent statistics indicate that economic activity in July was on the rise compared to the previous month. Earlier Rosstat reported that industrial output was up by 1.2% m-o-m in seasonally adjusted terms. Statistics published today on retail sales, construction, transport, and a few other key sectors of the economy also pointed to some improvement in July. For instance, the output of the five basic sectors was down by 3.0% y-o-y in July, while in June, it was down by 4.7% y-o-y. Even though retail sales were still strongly down (by 8.9% y-o-y) it was not as much as in June (9.6% y-o-y) and May (10.1% y-o-y). Construction was up by 6.6% in July and 4.5% in 7M22 (both are y-o-y). In 7M2, the output of the five basic sectors was down by a mere 0.3%. It cannot b...