Economic growth gradually turns more negative in May amid uneven dynamics by sectors and different challenges they face

RUSSIA ECONOMICS - In Brief 30 Jun 2022 by Alexander Kudrin

Rosstat reported that the output of the five basic sectors was up by 1.7% y-o-y in 5M22 but down by 3.2% y-o-y in May alone. Industry and transport posted a quite moderate y-o-y decline in May (around 1.7%-1.8% each) while retail sales collapsed by 10.1% - mainly due to the falling activity in the non-food segment. Food retail sales remained relatively stable. As a result, retail sales were down by 2.1% y-o-y in 5M22, heading for a much deeper contraction in 2022 as a whole. Later in the year, the non-food segment may stabilize amid disinflation and falling interest rates, while in April and May, when consumer lending shrank as rates jumped, the non-food segment suffered. Consumer paid services continued to expand y-o-y in May, albeit the pace moderated. Still, in 5M22, these services were up by 5.3% y-o-y. Agriculture and construction posted y-o-y growth both in May and 5M22 (2.1% and 2.3% in agriculture, and 3.6% and 5.1% in construction). Meanwhile, the m-o-m growth in construction looks to moderate quite fast. The major problems are seen in the manufacturing sector as it contracted by 3.2% y-o-y in May (but still was up by 1.9% y-o-y in 5M22. Car manufacturing almost collapsed, and it will take months to re-establish production of less sophisticated vehicles. This contraction caused other sectors, such as metallurgy, to suffer. The main problem for manufacturing is the ridiculously strong ruble, which will suppress efforts to re-establish production in many manufacturing segments. The mining sector was slightly down y-o-y in May but was up by 4.5% y-o-y in 5M22. The situation in the Russian industry deserves special attention, and in the next week or a bit later, a...

Now read on...

Register to sample a report

Register