Recent statistics point to no change: steady economic growth, uneven by sectors, amid accelerating inflation

RUSSIA ECONOMICS - In Brief 28 Nov 2024 by Evgeny Gavrilenkov

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Rosstat reported that in 10M24, the output of five basic sectors grew by 4.8% y-o-y. In October alone, it was up by 3.4% y-o-y – dragged on by poor numbers in agriculture and construction. The former fell by 3.8%, while the latter was up by a mere 2.2% (both numbers are y-o-y for 10M24). This year agricultural production was hit by weather conditions and the base effect as in 2024, the grain harvest (143 mln tons) was close to a historical record. This year the agrarians can collect about 130 mln tons, which is still quite a good result. Construction y-o-y growth remained nearly flat in recent months affected by accelerating inflation, higher interest rates and reduced demand for mortgages. In 2025, construction will likely continue delivering unimpressive performance, while agriculture has strong chances to rebound. Rosstat also reported that in the seven days ending on November 25, the weekly inflation print was alarming again as it was almost the same as a week ago (0.36% w-o-w). As a result, MTD and YTD inflation jumped 1.15% and 7.8%. In recent weeks inflation has accelerated faster than expected and in the remaining weeks it will likely stay high amid an unprecedented budgetary spree. In November and December, federal budget spending should exceed R10 trln, which appears to be quite an impressive amount given that in 10M24 this spending amounted to R29.9 trln. One cannot rule out that inflation in 2024 could climb to 10%, while the key rate hike in December now looks imminent. Growing federal budget spending positively affected industrial production as it grew by 0.5% m-o-m in seasonally adjusted terms. In 10M24, industrial production was up by 4.4% y-o-y. In Oct...