A decent start in January

RUSSIA ECONOMICS - In Brief 02 Mar 2023 by Alexander Kudrin

---

Rosstat reported that the output of the five basic sectors shrank by 2.5% y-o-y in January which was better than in 4Q22 when it contracted by 3.1% y-o-y. The performance of various sectors was quite uneven in January, but less so than in 2022. Industrial output and transportation services contracted by 2.2% and 2.3%, while industry shrank by 2.4% in January. Construction grew by 9.9%, agriculture – by 2.7%. Retail sales posted a deeper contraction (by 6.6% y-o-y, which was better than a 9.5% drop in 4Q22), while consumer paid services grew by 2.3%. It looks as though one may see continuous improvements in retail sales in the rest of the year that will be caused not only by the low base effect but due to decelerating inflation. Rosstat reported deflation in the seven days ending on December 27 by 0.2%, which looked very unusual for this time of the year. In the previous week inflation w-o-w decelerated sharply and MTD inflation reached only 0.44% on December 27. Inflation YTD on the same day was at 1.28%. In February as a whole inflation is likely to be around the same 0.44% or even below as the monthly inflation figure is calculated on a broader consumption basket than the one used for w-o-w calculations. If so, then the y-o-y inflation will fall by below 11% In February to be followed by a sharp decline of the y-o-y inflation in March (well below 4%) on the back of a base effect. Evgeny Gavrilenkov Alexander Kudrin