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2Q14 GDP by expenditures – shrinking imports offset full stop in final domestic demand


Rosstat has published the expenditure breakdown of GDP for 2Q14, confirming growth at 0.8% YoY.

Household consumption kept losing pace (0.8% vs. 3.7% in 1Q14 and 4.7% YoY in 2013). The decline in fixed capital formation significantly moderated to 2.1% YoY (from -7.0% in 1Q14), as well as drop in inventory investment. Exports slowed a bit to 1.3% YoY, while the decline in imports accelerated to 7.7% YoY (vs. -4.5% YoY in 1Q14), the lowest level since the crisis.

The latest GDP report highlights the ongoing reshuffle among economic drivers: while local demand is sticking to a firm downward trend, net exports are benefitting from the contraction in the import of goods and services.

Domestic demand suffered mostly on almost flat household consumption, while private investments (chiefly FAI, but slightly slower destocking as well) experienced a short-lived relief, probably due to a pick-up in housing construction. The former shaved from the headline acceleration around 1.6pp, while the latter added 0.9pp.

So far 2H14, monthly statistics (particularly, the closed gap between supply and demand, with manufacturing output sliding into contraction, public wages growth slowing to below private and continued geopolitical tensions) have broadly coincided with our forecast of a 0.1-0.3% YoY decline. The only positives for the short term will likely be import substitution, thanks to trade impediments, and degraded demand on imported goods and/or construction of the China-Russia gas pipeline. On balance, we expect quarters of lingering pause to come with annual GDP growth having dived underwater (especially in 4Q14 given the unfavourable comparison base). 

Daria Isakova, Vladimir Kolychev
VTB Capital analyst


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