The Russian Federal Customs Service has reported that the growth in non-CIS imports declined 6.4% YoY in May, its lowest for the last 41 months and significantly worse than the 13.8% YoY growth in April, bringing absolute volumes to USD 21.5bn. The growth in non-volatile components deteriorated even further, to -7.1% YoY, from 10.3% YoY in the previous month, while the annual increase in volatile items (ships, planes, etc.) smoothed to 1.9% YoY, from a spike of almost 50% YoY in April.
The growth in both investment and consumer imports plummeted into the red in May, with YoY drops of 6.4% and 4.8%, respectively. Importantly, the decline in car imports intensified to 12.4% YoY, from 1.4% YoY in the previous month.
The last spring month brought a significant broad-based YoY contraction in non-CIS imports. Even though such a weak print might partly be explained by the unfavourable base effect (the extended May holidays this year ate into the imports growth) and a correction after the notably high growth in April, MoM SA growth also declined substantially (-5.7% vs. 1.3% on average during 4mo13).
The key drags on growth were the 10% YoY drop in volumes of engineering products (in particular, mechanical equipment and cars) and the 28% YoY decline in meat imports.
Overall, the numbers imply that demand (consumer and investment) in Russia continued losing momentum. And given that we currently see no grounds for the weakness in the economy to improve in the near term, we believe that imports are set to remain subdued in the coming months.
Meanwhile, exports are set to contract even further (in both value and volumes terms), meaning that a moderation of imports growth would only slightly smooth the deterioration of the trade and current account balances and is unlikely to prevent RUB weakness in the coming months.