Friday December 13 2019
Russia Slashes Policy Rates, Signals Further Easing in 2020
Central Bank of the Russian Federation | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Central Bank of Russia cut its benchmark one-week repo rate by 25 bps to 6.25 percent during its December meeting and signaled more rate cuts were likely in the first half of 2020, saying households’ inflation expectations continue to decrease, while price expectations of businesses remain overall unchanged. Policymakers see annual inflation at 3.5–4.0 percent in 2020 and close to 4 percent further on.

Excerpts from the Information Notice of Bank of Russia:

Inflation dynamics. Inflation slowdown is overshooting the forecast. The annual consumer price growth rate declined to 3.5% in November (from 3.8% in October 2019) and was close to 3.4% according to the estimates as of 9 December. November results show that annual core inflation also decreased to 3.5% as compared to 3.7% in October. According to the Bank of Russia’s estimates, inflation indicators reflecting the most sustainable price movements are close to or below 4%. The Bank of Russia forecasts that inflation will range between 2.9–3.2% at the end of 2019.

In November, households’ inflation expectations continued to decrease, while remaining elevated. Business price expectations remain overall unchanged. Annual inflation slowdown paves the way for a future decline in inflation expectations of households and businesses.

In accordance with the Bank of Russia forecast, given the monetary policy stance, annual inflation will come in at 3.5–4.0% in 2020 and will remain close to 4% further on. Meanwhile, annual inflation will be below 3% in 2020 Q1 when the effect of the VAT rate hike is factored out from its calculation.

Economic activity. In 2019, the GDP growth rate may be close to the upper bound of the Bank of Russia forecast of 0.8–1.3%. This is primarily associated with a higher-than-expected GDP growth rate in Q3. However, the stability of such economic growth rates has yet to be assessed.

The Bank of Russia has left the 2020–2022 GDP growth forecast unchanged. The GDP growth rate will gradually increase from 0.8–1.3% in 2019 to 2–3% in 2022. This will be possible should the Government’s measures for overcoming structural constraints, including the implementation of national projects, be realised. However, reduced global economic growth expected over the forecast horizon will continue to exert a constraining impact on growth of the Russian economy.

Inflation risks. Disinflationary risks still exceed pro-inflationary risks over the short-term horizon. This is primarily related to the state of domestic and external demand. Disinflationary risks associated with movements in prices of certain food products persist, including on the back of a rise in supply of farm produce.

Meanwhile, pro-inflationary factors should be taken into consideration. Risks that food market trends may reverse cannot be ruled out, given that the ratio of temporary and permanent factors for this market is hard to estimate. At the same time, the monetary policy easing that has already been undertaken may have a stronger upward effect on inflation than the Bank of Russia estimates. Should the global economic slowdown be more pronounced, including due to tightening international trade restrictions and on the back of other geopolitical factors, this might lead to strengthened volatility in global commodity and financial markets, affecting exchange rate and inflation expectations. That said, pro-inflationary risks posed by budget expenditure growth in 2020 hold low because the rise in expenditures is likely to be distributed over time.

A number of internal conditions continue to pose pro-inflationary risks over a longer-term horizon. Significant risks are posed by elevated and unanchored inflation expectations. The mid-term inflation dynamics may also be affected by fiscal policy parameters, including decisions on the investment of the liquid part of the National Wealth Fund in excess of the threshold level set at 7% of GDP.




Thursday December 12 2019
Russia Q3 GDP Growth Confirmed at 1.7%
Federal State Statistics Service | Agna Gabriel | agna.gabriel@tradingeconomics.com

Russia's gross domestic product grew by 1.7 percent year-on-year in the third quarter of 2019, following a 0.9 percent expansion in the previous period and in line with preliminary estimates.

Within the service sector, growth accelerated for estate activities (2.2 percent vs 1.3 percent); public administration & defence (0.9 percent vs 0.2 percent) and hotels & catering (1.2 percent vs 0.2 percent). Meantime, financial & insurance activities grew 7.9 percent, the same as in Q2. In addition, there was a rebound in wholesale & retail trade (2.2 percent vs -0.6 percent); information & communication (0.1 percent vs -2 percent) and professional, scientific and technical activities (0.7 percent vs -0.4 percent).

On the other hand, output rose at a softer pace for: health and human services (1.5 percent vs 1.7 percent); and leisure and entertainment (1.3 percent vs 1.4 percent). A contraction was seen in transportation & storage (-0.1 percent vs 2.9 percent); administrative & support service activities (-0.6 percent vs -0.5 percent); and education (-0.7 percent vs -0.4 percent).

Within industrial activity, manufacturing growth accelerated to 2.5 percent from 0.6 percent; while electricity, gas & steam, air conditioning (2.0 percent vs 2.3 percent); water supply, water disposal, organization of waste collection & disposal, pollution control activities (0.1 percent vs 2.1 percent) and mining (2.0 percent vs 3.0 percent) slowed.

Construction output was flat for the third consecutive period.

Agriculture, forestry & fishing climbed 2.6 percent, compared to a contraction of 0.1 percent increase in the last quarter.




Friday December 06 2019
Russia Inflation Rate Falls to 1-Year Low of 3.5%
Federal State Statistics Service | Agna Gabriel | agna.gabriel@tradingeconomics.com

Russia's annual inflation fell further to 3.5 percent in November 2019 from 3.8 percent in the previous month and below market expectations of 3.6 percent. That was the lowest inflation rate since October 2018, due to lower prices of both food and non-food products.

Food prices increased 3.7 percent in November, compared to 4.2 percent in October, with upward pressure coming from fruits and vegetables (2.8 percent), bread and bakery products (7 percent), meat and poultry (1.3 percent), fish and seafood (5.4 percent), and milk and dairy products (6.4 percent). Also, non-food products cost rose 3.1 percent (vs 3.2 percent in October) while services prices advanced 3.9 percent (vs 3.8 percent in October).

Annual core inflation rate eased to 3.5 percent in November, the lowest since November 2018.

On a monthly basis, consumer prices edged up 0.3 percent, following a 0.1 percent gain in October. Food prices advanced faster (0.5 percent vs 0.2 percent) and services cost rebounded (0.1 percent vs -0.2 percent) while non-food products prices slowed (0.2 percent vs 0.3 percent).




Wednesday November 13 2019
Russia Q3 GDP Growth Beats Forecasts
Federal State Statistics Service | Joana Ferreira | joana.ferreira@tradingeconomics.com

Russia's gross domestic product grew by 1.7 percent year-on-year in the third quarter of 2019, following a 0.9 percent expansion in the previous period and beating market expectations of 1.6 percent, preliminary data showed.

GDP growth for the third quarter came in below the Ministry of Economic Development's early estimate of 1.9 percent.

The Federal State Statistics Service said that the GDP was mainly supported by agriculture (5.1 percent), industry, including mining (2.9 percent), as well as wholesale trade. The total passenger turnover due to state support of regional air transportation increased by 6.2 percent, while there was a 0.6 percent decline in cargo turnover during transportation.

The economy grew by 1.1 percent in the first nine months of 2019. The ministry had forecast 2019 GDP growth of 1.3 percent, a slowdown from the 2.3 percent seen in 2018.


Wednesday November 06 2019
Russia Inflation Rate at Near 1-Year Low
Federal State Statistics Service | Joana Ferreira | joana.ferreira@tradingeconomics.com

Russia's annual inflation fell further to 3.8 percent in October 2019 from 4.0 percent in the previous month, in line with market expectations. That was the lowest rate since November 2018, as prices rose at a softer pace for goods and services.

Food prices increased 4.2 percent in October, compared to 4.6 percent in September, with upward pressure coming from fruits and vegetables (3.4 percent), bread and bakery products (7.7 percent), meat and poultry (3.0 percent), fish and seafood (5.2 percent), and milk and dairy products (6.4 percent). Also, non-food products cost rose 3.2 percent (vs 3.4 percent in September) and services prices advanced 3.8 percent (vs 4.0 percent in September).

Annual core inflation rate eased to 3.7 percent in October, the lowest since December 2018.

On a monthly basis, consumer prices edged up 0.1 percent, recovering from a 0.2 percent drop in September and compared to market expectations of a 0.2 percent gain. Food prices rebounded (0.2 percent vs -0.4 percent) and non-food costs continued to rise (0.3 percent vs 0.2 percent), while services prices fell 0.2 percent for the second consecutive month.


Friday October 25 2019
Russia Cuts Key Rate to 6.5%, More than Expected
Central Bank of the Russian Federation | Agna Gabriel | agna.gabriel@tradingeconomics.com

The Central Bank of Russia slashed its benchmark one-week repo rate by 50bps to 6.50 percent on October 25th, surprising markets who expected a 25bps reduction. It is the fourth rate cut this year, as inflation slowdown is overshooting the forecast and inflation expectations continue to decrease. The central bank lowered its annual inflation outlook for 2019 to 3.2–3.7% from 4.0–4.5%.

Excerpts from the Information Notice of Bank of Russia:

Inflation dynamics. Inflation slowdown is overshooting the forecast. Annual consumer price growth rate declined to 4.0% in September (from 4.3% in August 2019) and was close to 3.8% according to the estimate as of 21 October. September results show that annual core inflation also decreased to 4.0% as compared to 4.3% in August. According to the Bank of Russia’s estimates, inflation indicators reflecting the most sustainable price movements are close to or below 4%.

The Bank of Russia has lowered its annual inflation forecast for 2019 from 4.0–4.5% to 3.2–3.7%. Meanwhile, annual inflation will be slightly below 3% in 2020 Q1 when the effect of the VAT rate hike is factored out from the calculation of annual inflation. Given the monetary policy stance, annual inflation will come in at 3.5–4% in 2020 and will remain close to 4% further on.

Economic activity. The Russian economy’s growth rate still remains subdued. In these circumstances, the Bank of Russia keeps unchanged its 2019 GDP growth forecast in the range of 0.8–1.3%. However, current data suggests that the growth of the Russian economy might accelerate in 2019 Q3, partially driven by temporary factors.

The Bank of Russia has left the 2019–2022 GDP growth forecast unchanged. The GDP growth rate will gradually increase from 0.8–1.3% in 2019 to 2–3% in 2022. This will be possible should the Government’s measures for overcoming structural constraints, including the implementation of national projects, be realised. However, the global economic slowdown expected over the forecast horizon will continue to exert a constraining impact on growth of the Russian economy.

Inflation risks. Disinflationary risks exceed pro-inflationary risks over the short-term horizon. This is primarily related to the weak dynamics of domestic and external demand. Disinflationary risks associated with movements in prices of certain food products persist, including on the back of a rise in supply of farm produce. Pro-inflationary risks posed by budget expenditures growth in the second half of 2019 — early 2020 hold low because the rise in expenditures is likely to be more distributed over time. At the same time, should global economic slowdown be more pronounced, including due to tightening international trade restrictions and on the back of other geopolitical factors, this might lead to strengthened volatility in global commodity and financial markets, affecting exchange rate and inflation expectations.

The Bank of Russia leaves mostly unchanged its estimates of risks associated with wage movements and possible changes in consumer behaviour. These risks remain moderate.

If the situation develops in line with the baseline forecast, the Bank of Russia will consider the necessity of further key rate reduction at one of the upcoming Board of Directors’ meetings. In its key rate decision-making, the Bank of Russia will take into account actual and expected inflation dynamics relative to the target and economic developments over the forecast horizon, as well as risks posed by domestic and external conditions and the reaction of financial markets.


Thursday October 17 2019
Russia Jobless Rate Unexpectedly Rises to 4.5%
Federal State Statistics Service | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

Russian unemployment rate rose to 4.5 percent in September 2019 from an all-time low of 4.3 percent in the prior month while markets had expected it to remain steady.

The number of unemployed rose by 113 thousand to 3.371 million in September from 3.258 million in the previous month. Compared with the previous year, unemployment decreased by 63 thousand from 3.434 million.

At the same time, registered unemployment came in at 0.67 million, lower than August's 0.71 million but above last year's 0.65 million.

Meanwhile, real disposable personal income rose 3 percent year-on-year in the third quarter, the first gain in more than four years; and went up 1.7 percent on a quarterly basis.

The Statistical Office of Russia (Rosstat) did not publish data on real wages, saying that it would publish the data for September in November.





Friday October 04 2019
Russia Inflation Rate at 10-Month Low of 4%
Federal State Statistics Service | Agna Gabriel | agna.gabriel@tradingeconomics.com

The annual inflation rate in Russia decreased to 4 percent in September 2019 from 4.3 percent in the previous month and below market expectations of 4.1 percent. It was the lowest inflation rate since November 2018.

Year-on-year, cost slowed for both food (4.6 percent vs 5.0 percent in August) and non-food products (3.4 percent vs 3.5 percent) while services prices also eased (4.0 percent vs 4.4 percent). 

Annual core inflation rate edged down to a nine-month low of 4.0 percent in September from 4.3 percent in the previous month. 

On a monthly basis, consumer prices decreased 0.2 percent, the same as in the previous month and compared to market expectations of a 0.1 percent decrease. Food products cost continued to decline (-0.4 percent vs -0.9 percent) while services prices fell (-0.2 percent vs 0.2 percent). Meanwhile, inflation was steady for non-food items (at 0.2 percent). 


Wednesday September 18 2019
Russia Jobless Rate Falls to Record Low of 4.3%
Federal State Statistics Service | Agna Gabriel | agna.gabriel@tradingeconomics.com

Russian unemployment rate decreased to an all-time low of 4.3 percent in August of 2019 from 4.5 percent in the previous month and below market expectations of 4.4 percent.

The number of unemployed dropped by 106 thousand to 3.258 million in August from 3.364 million in the previous month. Compared with the previous year, unemployment decreased by 248 thousand from 3.506 million.

Meantime, registered unemployment came in at 0.712 million, lower than July's 0.727 million but above last year's 0.679 million.

Russia’s real wages increased 3 percent from the previous year in August of 2019, the same as in the previous month and in line with market expectations. Average nominal wages climbed 7.4 percent to RUB 45,100 while annual inflation was at 4.3 percent, its lowest since December 2018.


Monday September 09 2019
Russia Q2 GDP Growth Confirmed at 0.9%
Federal State Statistics Service | Joana Ferreira | joana.ferreira@tradingeconomics.com

Russia’s annual economic growth was confirmed at 0.9 percent in the second quarter of 2019, accelerating from an over two-year low of 0.5 percent in the previous period.

Within the service sector, there was a rebound in real estate activities (1.3 percent vs -3.5 percent) and public administration & defence (0.2 percent vs -0.1 percent), while financial & insurance activities growth accelerated (7.9 percent vs 7.6 percent). Meanwhile, output rose at a softer pace for: transportation & storage (2.9 percent vs 3.1 percent); hotels & catering (0.2 percent vs 4.8 percent); health and human services (1.7 percent vs 2.3 percent); and leisure and entertainment (1.4 percent vs 3.7 percent).

A contraction was seen in wholesale & retail trade (-0.6 percent vs -3.0 percent); information & communication (-2.0 percent vs 1.2 percent); professional, scientific and technical activities (-0.4 percent vs 0.4 percent); administrative & support service activities (-0.5 percent vs -2.8 percent); and education (-0.4 percent vs -0.2 percent).

Within industrial activity, electricity, gas & steam, air conditioning output rebounded firmly (2.3 percent vs -1.0 percent) and water supply, water disposal, organization of waste collection & disposal, pollution control activities advanced faster (2.1 percent vs 0.1 percent). Meanwhile, manufacturing growth was unchanged at 0.6 percent, while mining output increased at a softer rate (3.0 percent vs 4.6 percent).

Construction output was flat for the second consecutive period.

Agriculture, forestry & fishing edged up 0.1 percent, compared to a contraction of 1.2 percent in the last quarter.