Economic performance continued to improve in May

RUSSIA ECONOMICS - In Brief 01 Jul 2021 by Alexander Kudrin

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In the aftermath of the previous statistical release that confirmed that the Russian industrial growth was gathering pace in May, Rosstat reported that the rest of the monthly indicators also didn’t look bad last month. Retail sales were up y-o-y by 27.0% and 10% in May and 5M21. The non-food segment was up by 50.0% and 19.0% that resulted from base effects. Growth y-o-y in the food segment was more moderate – 8.5% and 1.5% accordingly. Freight transportation was up y-o-y by 11.1% and 3.7% (in May and 5M21), construction activity accelerated to 7.7% y-o-y in May and 3.5% y-o-y in 5M21. Note that the base effect in construction was almost non-existent as, during the lockdown in 2020, there were no serious restrictions imposed in the construction sector. Paid consumer services grew y-o-y in May by 52.0% and by 12.5% in 5M21.These numbers do not challenge GKEM Analytica’s GDP 2021 growth forecast so far (3.8%). However, the recently increased daily incidence rate forced the authorities to moderately tighten restrictions - to prevent faster spreading of the virus. At this stage, GKEM Analytica expected rather a moderate impact of these measures on economic growth, though such segments as passenger transport, tourism, and some other services may be affected. However, on the aggregate level, this negative effect may be offset by stronger, than was expected earlier, demand for consumer durables and investments in residential real estate.The Central bank reported that despite the key rate hikes, consumer credit (including mortgages) demonstrated strong growth in May (by 2.1% m-o-m). This growth accelerated from 2.0% m-o-m growth recorded in March and April. As of June 1, it ex...