July IP data hints economy 'cooling off' in 3q21

RUSSIA ENERGY / FINANCE - In Brief 25 Aug 2021 by Marcel Salikhov

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Rosstat started publishing its data only Wednesdays. This brief is a short overview of the data published today. Industrial productionRosstat released July 2021 industrial production data. It's one of the first 'hard numbers' available for 3q21 from the national statistics office. Formally baseline IP index increased by a robust 6.8% yoy. But it's a mere reflection of the 'base effect' of last year. Industrial output decreased by 0.1% mom saar in July after 0.2% decline in June. In July, manufacturing was down by 0.8% mom saar, while mining increased its output by 1.1% based on higher crude oil production and robust natural gas production. So while oil & gas output supports the economy, the manufacturing sector continues to slide down. The main weakness currently comes from petroleum products, food production, and electronic equipment. So the IP recovery is firmly over. Chart 1. IP and manufacturing index, Jan 2015 - July 2021According to Rosstat, business confidence in manufacturing from 0.7 in July to 0.0 in August. Based on available data, we've updated our GDP nowcast model for 3q21. Currently, we expect a significant slowdown in GDP growth. After 1.6% qoq saar growth in 2Q21 our GDP nowcast forecasts just 0.2 qoq growth in 3q based on available data. Weekly inflationRosstat also reported a weekly inflation estimate for 17-23 August. Surprisingly consumer prices increased by 0.1% wow while traditionally, CPI decreases in mom terms in August based on lower fruits & vegetable prices. In addition, there was an increase in consumer prices in most of the products covered by Rosstat weekly. So it's a strong indication that August may be 'bad' in terms of inflation.