Economic growth moderates in August

RUSSIA ECONOMICS - In Brief 04 Oct 2021 by Alexander Kudrin

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Rosstat reported that basic sector output (industry, agriculture, construction, transport, trade combined) was up y-o-y by 4.0% and 6.4% in August and 8M21. Growth in August was relatively slow due to negative y-o-y growth in Agriculture (-10.1%) as harvesting season this year started later than a year ago. A better number is expected in September. The industry grew by 4.7% and 4.5% y-o-y over the same periods.Accelerated inflation started to affect the real rate of growth in the consumer market, therefore contributing to its slowdown. Meanwhile, the base effects are being gradually eliminated and in 4Q21 their impact on the y-o-y growth rates will almost evaporate. Retail sales were up y-o-y by 5.3% and 8.8% in August and 8M21. Paid consumer services were up by 15.1% and 19.2% y-o-y over the same period. Retail sales growth was largely driven by the non-food segment – sales in this segment were up by 7.5% and 15.7%, while food retail sales were up by 2.8% and 2.0% (y-o-y in August alone and 8M21). As real wages grow moderately (up by 2.2% and 3.2% y-o-y in July and 7M21 – the latest available numbers) it appears that strong consumption of non-food items was largely fueled by consumer lending which increased by 1.9% m-o-m in August. Inevitable moderation of consumer lending will cool down the consumer market and housing construction in 2022. Meanwhile, mortgages increased in August by 1.7% m-o-m. Construction was up by y-o-y 6.2% and 7.0% in August and 8M21.Recently published statistics points that GDP this year is still on the track to expand by around 4.2%.Evgeny GavrilenkovAlexander Kudrin