Last year, May was a bleak month for Russia. The country's gross domestic product was down 4.8% (year-over-year), the manufacturing sector contracted by over 8% (y/y), and retail sales plunged 9.2% (y/y).
It proved to be the worst month in terms of year-on-year economic shrinkage in 2015. Surely, it could only get better from there...
This May, however, many economic indicators are still showing a contraction from last year's dismal numbers. It appears that the Russian economy has yet to respond to the rise in the oil prices as the May macro stats show.
The average Urals oil price was up more than 56% in May versus January at $44.7/barrel. It is still, however, $19/b below the average price in May 2015 ($64.7/b).
Russian key macro indicators in 2016 (% y/y):
Source: www.gks.ru, www.cbr.ru, www.interfax.ru
The GDP numbers have yet to be released by the economic ministry, but the Russian statistics committee has just published its key GDP components for May.
Industrial output was up 0.7% (y/y) from a very low base last year but down 0.3% month-over-month (seasonally adjusted) and below the Interfax consensus. The construction sector was down 9% (y/y) in May after what seems like a bit of a recovery in the first quarter of 2016. Retail trade declined 6.1% (y/y) from an already a very low number last year.
Nominal wages were up 6.2% on an annual basis, but inflation of over 7% meant that real wages shrunk by 1% over the same period. One good sign is that in USD terms, the average monthly wage was up by a third in May compared to January. Still, at $557/month (nominal, before income tax), it remains much less than the $680 seen in May of last year.
This could explain why Russian consumers are not in the mood to spend.
Industrial output might have registered a 0.7% annual increase, but this was due to the very low base seen last year. Industrial output was actually down 0.3% /m/m), which may not be a temporary blip if manufacturing remains as weak as it is.
The mining sector output is levelling out despite a rise in the oil price (there is very little short-term correlation between the two).
Russian industrial output on monthly and annual basis, %:
The major part of Russia's industrial output – manufacturing – was disappointingly weak in May, up 0.3% on last year, which essentially tells us that there was no annual growth in manufacturing over the last 12 months.
The sector accounts for over half of Russia's industrial output and is critical for the country's economic recovery.
Structure and change in Russian manufacturing output (% y/y):
Source: www.gks.ru (note: manufacturing sector structure is based on value added in current prices in 2015)
So far, the output in the largest manufacturing industries, oil refining and metallurgy, has been either contracting or flat on last year. The growth in food production might be levelling off as the sector hits both the capacity and the demand buffers.
Chemicals producers continue to do well and there is a visible bounce in the automotive and shipbuilding industries, again from a low base.
Still, there are few signs of improvements from Russian industry overall, which depends on domestic investment. These, of course, continue to shrink compared to last year at an alarming pace.
All in all, Moscow hasn't much to show for the oil price bounce... yet.