Russia Watch: April key macro data skyrockets due to low base effect

Key macro indicators for April 2021 surged on the current low base effect. Industrial production (IP) added 7.2% yoy, and consumer demand has shown even more notable growth of 38.2% yoy. However, in mom growth terms both sectors looked rather unimpressive.

Consumer demand turned into positive zone on base effect (% yoy)

Rosstat, RBI/Raiffeisen Research

In April 2021, industrial production (IP) growth skyrocketed to 7.2% yoy. Moreover, Rosstat revised the figure for the previous month to 2.3% yoy (from 1.1% yoy). As we anticipated, the surge in the yoy pace came from the low base effect of 2020. In April 2020 IP dropped by 5.5% mom, seasonally adjusted (sa). However, in April 2021, IP growth was nonexistent – 0% mom sa. In the upcoming month, we will observe another base effect due to the oil production cuts within the OPEC+ agreement in May 2020 (could result in +8% yoy for oil or up to 2 p.p. in IP yoy dynamics). Besides, in 2021 we expect fundamental support for IP from the fiscal stimulus planned for this year.

The yoy consumer demand growth surged to 38.2% yoy driven by the low base effect of April 2020 when nationwide lockdown was introduced. The most impact came from non-food (+67.7% yoy) and services (+52.1% yoy). Food product volumes also increased in comparison to the previous year but at a more modest pace (+10.2% yoy). However, in mom terms, consumer demand performance was not impressive in April: retail sales stood at 0.7% mom seasonally adjusted, while services even declined (-0.2% mom sa). However, retail sales turned to the positive zone after a two-month deceleration (-0.2% mom sa in February and March).

A certain pause in monthly dynamics could be related to

  1. the still recovering condition of the economy and
  2. the lagging impact of the fiscal stimulus.

Despite that, we expect further consumer demand improvement driven by the planned fiscal stimulus and accelerating consumer lending. Still, the authorities find that consumer demand is recovering fast. Minister of Finance A. Siluanov claimed that anti-crisis budget expenditures should be reduced in favor of investment expenditures. The Central Bank of Russia (CBR) notes that the lending pace is close to the recent years’ maximum. This could result in tighter regulation of consumer loans and slower recovery of consumer demand.