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Output & Demand Indicators for August


Yesterday, Rosstat published its regular monthly economy pack for August.

In August, the unemployment rate dropped to 5.2% (as we predicted), an absolute low, from 5.4% over the previous three months. However, more importantly the SA unemployment rate continued ticking down and decreased to 5.6% in the last summer month, from 5.7% in July.

While nominal wages growth strengthened to 14.2% YoY in August, from the downwardly revised 14.1% YoY in July, real wages growth was below 8% YoY (from 10.7% YoY in 1H12), restrained by inflation pressures. The narrower labour supply implies a rising challenge for employers to hold on to their employees, hence bringing nominal wages onto an upward track.

Real retail sales growth was down on the poor increase in the food component. The key factor behind the August decrease to 4.3% YoY, from 5.4% YoY in July, was a further moderation in food sales growth, which slowed to 0.8% YoY (-1.9% MoM SA), on the back of food price growth accelerating.

Investment growth fell to 16-month low in August with a 2.3% YoY increase following the 10.2% YoY growth in 7mo12 on average.

The August statistics came fully in line with our expectations, reflecting that the economy is cooling. Retail sales and investment growth rates kept declining, touching new lows. On a SA basis, the unemployment rate dived deeper for the second month in a row, which implies contained labour supply and pressure on nominal wages. While the latter added steadily, real incomes growth was dragged down by higher inflation. The ongoing moderation in overall economic activity is in line with our expectations, but the stronger than expected pace poses downside risks to our forecast of 3.5% GDP growth for this year. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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