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September’s GDP growth slowed to 2.5% YoY


According to Deputy Minister for the Economy Andrey Klepach, GDP growth edged down to 2.5% YoY in September (+0.4% MoM SA) from 2.8% YoY in August and 3.0% YoY in July, bringing the 3Q12 reading to 2.8% YoY (vs. 4.5% YoY in 1H12). The key drivers were growth in industrial production and retail sales, which added 0.3% MoM SA and 0.5% MoM SA, respectively. At the same time, investment activity dragged economic growth down on the back of the poor performance of the construction sector and slowdown in corporate lending.

In separate news, Klepach argued that September’s hike in key rates by the CBR had fallen short of expectations as it had a low containing effect on inflation but dug greatly into real sector growth. 

The recent MinEconomy statements chime with our view that the growth of Russia’s economy continues to slow and that there are downside risks to our FY12 forecast of 3.5%. Taken together with the comments about the recent rate hikes, the probability of a ‘no hike’ policy rate decision in November is strengthening.

On a technical point, it is worth noting that the CBR’s key policy rate hike last month will only have a meaningful impact on inflation in a couple of quarters, thus any conclusions on their efficiency are premature. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

GDP, CBR, Russia

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