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Economy in June


Rosstat’s June economic data shows retail sales growth rebounding slightly to 6.9% YoY from 6.8% YoY in May, mainly spurred by the expansion in non-food sales, which accelerated to 9.4% YoY (+1.2% MoM SA).

Real wages likely supported consumption growth and edged to 12.9% YoY in June (from 12.4% YoY in May). Given that CPI accelerated to 4.3% YoY in June (from 3.6% YoY), the increase in real wages was due to a jump in nominal wages growth to 17.7%YoY (from 16.5% YoY). Rosstat revised growth in nominal and real wages upwards in May (to 12.4% YoY and 16.5% YoY, respectively). State sector wage growth was likely the key driving force (in May they rose an astonishing 26.6%YoY).

The unemployment rate was flat at 5.4% in June, while the SA unemployment rate rose for the second month in a row, to 5.8% (from 5.7% in May). However, it is still at pre-crisis lows. We believe the recent increase in SA unemployment is temporary owing to the earlier-than-usual start to agricultural seasonal work. Investment growth dropped to 4.7% YoY in June, from 7.7% YoY in May. Investments added a strong 10.2% YoY in 1H12. 

Robust consumption readings, a tight labour market and ongoing impressive expansion of retail lending growth highlights the overheating in the economy. The increase in fixed capital investments decelerated in line with weak PMIs and softer IP in June. We expect the economy to expand 3.5% YoY in 2012 (cooling from 4.3% YoY in 2012 on the back of weaker investments, softer fiscal spending growth in YoY terms, lower lending growth and a higher savings ratio in 2H12).

June’s economic data will likely result in the CBR giving greater consideration to the CPI path rather than weaker production (as the monetary authorities did this spring). Hence, with CPI assumed at 7.0% YoY at end-2012, we still expect monetary policy tightening later this year. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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