Shallower decline to nudge (a small) upward revision race

  • Rosstat has added one more positive data surprise to the streak established by Markit's PMI (the PMI Composite stands at 56.8 for July) and AEB's car sales data (+6.8% YoY in July vs. the Bloomberg consensus of -9.1% YoY and our 0% YoY forecast): GDP in 2Q20 is estimated to decline -8.5% YoY vs. the Bloomberg-compiled consensus of -9.6% YoY .
  • The print is also above our estimate, but is well aligned with the index of the basic industries output, which has shown a decline of just -7.8% YoY.

GDP growth vs. output of base sectors, % YoY

Source: Rosstat, VTB Capital Research.
  • With our 2H20 projections unchanged (we expect -4.9% YoY in 3Q20F and -3.2% YoY in 4Q20F), this release implies an improvement to our relatively upbeat growth expectations of -4.1% YoY for 2020F and suggests an even larger revision of the CBR's July -(4.5-5.5)% range for this year.
  • As we wrote in our Industrial Production - Weaker optics spell blurrier growth outlook, of 17 July, the recovery in manufacturing is synchronised, albeit slow. In June, production improved in 19 out of 24 industries in manufacturing. We expect the synchronised recovery in manufacturing to prevail throughout the remainder of the year, supported by the recovery of both external and internal economic activity and the ongoing (and remaining) large budgetary expenses compared with the previous year, supporting industrial production. That said, we expect industrial production to recover by 4Q20, and to total a -(2.5-4)% YoY contraction for the full year.
  • Also, while in June mining & quarrying (-14.2% YoY) pulled the headline growth down, with crude oil & gas extraction (-15.4% YoY) being capped by the OPEC+ agreements, as our oil and gas team notes, when restrictions were lifted at the start of August. Russian companies were quick to increase their crude production, which rose 5% in the first three days of the month.

GDP growth, % YoY

Source: Rosstat, VTB Capital Research
  • Several caveats must be placed here. First, we believe that the statistical reporting was distinctly not 'business as usual' in 2Q20, which might mean that the firms which fared better have reported while the data for their less fortunate peers has been imputed and so these imputations could favour growth rates which are closer to zero, thus providing an optical improvement in the growth rates. To put it more concisely, the report is preliminary and the growth rates could well be revised. 2) Economic activity has found a stronger footing in the support measures extended by the government to families and firms (see our (Very) Technical Brief - #RawData; public spending timeline of the COVID-19 package, of 30 April), but which will gradually br rolled back later into the year. For us, this means that the need to revise the higher growth rate for 2H20 is not unambiguously signalled by the current report.

Base industries' contributions, pp, % YoY

Source: Rosstat, VTB Capital Research

GVA: working and non-working industries, %

Source: Rosstat, VTB Capital Research.

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Дата публикации:

12 August 2020