Monthly VEB GDP Index

Monthly estimate of Russian GDP

  • Main principles and data sources

    Monthly VEB GDP index is a leading indicator for quarterly GDP dynamics. Its estimation is based on the production method using available monthly data. Aggregation of GDP indices is done using average annual prices of the previous year.

    Year-on-year change in GDP is estimated using Federal State Statistics Service’s monthly data on changes in production of goods and services in major industries. Based on this data, we estimate indices of value added in the main industries.

    Estimate of net taxes on products and imports is done using Federal State Statistics Service’s data on production of excise goods, Ministry of Energy’s preliminary data on the volume of exports of oil and gas, Customs Service’s data on imports from non-CIS countries and VEB experts’ assessment.

    Month-on-month change in GDP adjusted for seasonal and calendar factors is estimated using an indirect method, i.e., the key components of GDP are seasonally adjusted and then are aggregated into the overall index. We additionally do seasonal adjustment using a direct method (by directly adjusting the GDP index).

    In case of sizeable differences between the adjustments done using indirect and direct methods, the series are normalized by distributing the difference between the two series across adjusted elements.

    Nominal GDP is estimated using assessment of the overall deflator index (year-on-year), which aggregates deflators of the main components of value added and net taxes on products and imports.

    The calculations are based on Federal State Statistics Service’s monthly data on the change in the value of shipment of own production goods, data on activities and own services in mining, manufacturing, production and supply of electricity, gas and water.

    The main components of the deflator of net taxes on products are assessed using the dynamics of consumer prices, changes in the exchange rate, changes in the prices of excise goods and changes in world oil prices. The calculations are performed using an algorithm which is used to determine the value added volume indices of the main GDP components.

2015

  • June

    In June 2015the decline in GDP slowed down: GDP contracted by 4.5% year-on-year after a decline by 5.0% in May. In month-on-month terms, GDP continued to decline, with the reduction amounting to0.3%. In the second quarter GDP declined by 4.7% (year-on-year) after a decline of 2.2% in the first quarter.

    Month-on-month GDP change: decline continued

    VEB GDP Index, January 1999 = 100, seasonally
    adjusted

    According to VEB estimate, seasonally and calendar adjusted GDP has been declining for six consecutive months. In June GDP contracted by 0.3% after a decline of 0.5% in May and 0.8% in April.

    Almost all main economic sectors demonstrated a negative trend: agriculture ( 0.2%),mining ( 0.2%), manufacturing (-0.1%), electricity, gas and water supply(-0.1%), construction ( 0.6%) and retail trade (-0.5%). Transport (0.1%) and net taxes (0.1%) had a positive impact on GDP.

    Year-on-year change: the decline in GDP slowed down to 4.5%

    VEB GDP Index, year-on-year, %

    VEB estimate suggests that in June 2015 GDP decreased by 4.5% compared to the same period of the previous year, after a decline of 5.0% in May 2015 (the maximum year-on-year decline so far). The improvement in trend is mainly attributable to the calendar effect (there were two extra working days compared to June 2014), which primarily resulted in an improvement in manufacturing and construction. Also there was a significant improvement in the dynamics of taxes on products.

    Overall, the decline in GDP in the first half of the year amounted to 3.5%, with the main negative input coming from the second quarter performance (-4.7%).

    Comment by Andrei Klepach, Chief economist of VEB

    “A slight slowdown in year-on-year GDP fall in June was mainly related to a favorable calendar factor rather than a reversal of the negative trend. If the seasonal and calendar effects are excluded month on month GDP decline persisted. The tendency continues for six consecutive months and exceeds duration of recessions during the previous crises. At the same time the depth of the decline is significantly smaller. Obviously, the current GDP dynamics has a much smaller cyclical component, if compared to GDP fall in 1998 and 2009. This fact does not allow to expect a fast recovery in the second half of the year.

    In June the decline in consumer demand has resumed again. Positive factors associated with decreasing inflation and quite favorable labor market conditions do not yet outweigh the factors associated with decreasing retail credit and low consumer confidence. This has led to growth of precautionary savings. Net savings rate reached 13% in June, whereas last year it was in the range of 4-10% of disposable income.

    The decline in capital investments that was observed in the first five months of the year, stopped in June. However, the trends in construction and capital goods production have remained negative. Credit markets conditions remain tight, and the annual credit growth continues to slow down.

    According to our estimate, the fall in GDP increased in the second quarter, amounting to 4.7%, after a decline in the first quarter by 2.2%. In comparison to the previous quarter the decline continued, amounting to 1.9%. We estimate that the fall in GDP will be largely exhausted in the third quarter. This could happen mainly due to an end of decline in consumer demand. Favorable harvests may even bring about positive quarterly growth. However, the recovery will be restrained considerably.”

    GDP change in May 2015 has been revised

    VEB has revised upwards the year-on-year GDP decline in May (from -5.4% to -5.0%) due to the fact that the data of the Federal customs service of Russia on oil exports and commodity imports was more positive than the preliminary estimate of VEB.

    The month-on-month GDP decline slowed down slightly from -0.6% to -0.5%.


    VEB GDP Index *


    Growth Volume, bln. RUB
    Year-on-year, % Month-on-month, %, SA
    Q1 2015 -2,2 -2,3 16 565
    Q2 2015 -4,7 -1,9 18 238
    April 2015 -4,7 -0,8 6 061
    May 2015 -5,0 -0,5 6 023
    June 2015 -4,5 -0,3 6 154

    * Main principles and data sources


  • May

    VEB flash estimate suggests that GDP continued to decline in May 2015: it contracted by 0.6% month-on-month and was down by 5.4% year-on-year (after a decline by 4.8% in April).

    Month-on-month GDP change: slowdown continued

    VEB GDP Index, January 1999 = 100, seasonally
    adjusted and adjusted by working days

    According to VEB estimate, seasonally adjusted GDP has been declining for five consecutive months. GDP in May contracted by 0.6% after a decline by 0.8% in April. Over the last 5 months, GDP slumped by 4.4%.

    The main factors behind this downturn were a decline in manufacturing (-0.7%), mining ( 0.4%), electricity (-1.7%), construction ( 3.5%) and services (-1.0%). By contrast, the negative contribution of retail trade came to zero in May. Furthermore, agriculture has continued to make a positive impact on GDP.

    Year-on-year GDP contraction reached 5.4%

    VEB GDP Index, year-on-year, %

    VEB estimate suggests that in April 2015 GDP decreased by 5.4% compared to the corresponding period of the previous year, after a decline of 4.8% in April 2015.Over the last five months, GDP declined by 3.4%.

    The deepening of the current economic downturn has been mainly attributable to deterioration in industrial production, construction, transportation, and financial services.

    Comment by Andrei Klepach, Chief economist of VEB

    "The economy has demonstrated sustainable negative trend. GDP has been declining for five consecutive months at a pace of 0.6-0.8% per month. However, the main factors behind this economic decline are changing.

    Investment demand is weakening at an increasing rate, pushing down construction and production of investment goods.

    Over the past two months, a decline in machine-building and construction materials industries as well as imported equipment rapidly accelerated. Fall in construction reached double-digit numbers and became the main factor behind the GDP slump in May.

    At the same time, the weakening of consumption that lead to an output drop in the first months of 2015 has been almost exhausted. In May, retail trade after declining for four consecutive months stabilised at the April level. A slowdown in inflation has to some extent supported purchasing power of households. However, growth of seasonally adjusted unemployment rate resumed in May, which can restrain consumer sentiment in the coming months.

    Another notable factor is the exhaustion of growth in oil product export, which supported GDP in the first quarter. At the same time, it is expected that demand for natural gas exported by Russia will increase in the coming months due to a strong decline in prices. Taking into account output dynamics in April-May, we estimate that GDP will contract by more than 5% in the second quarter.

    According to our estimate, net capital outflows decreased from 13 bln. in April to 6 bln. in May. Arguably, this is due to both ruble appreciation and lowerrepayments ofthe external debt.

    Yet the two factors are temporary, so net capital outflow is likely to increase in the future."

    GDP change in first quarter has been revised in May 2015

    The first GDP estimate for the first quarter 2015, published by Rosstat, appeared to be lower compared to its flash estimate (-2.2% vs. -1.9%). Therefore, VEB GDP Index has been revised to comply with the official Rosstat data on the first quarter.

    The VEB revision resulted in a stronger year-on-year GDP decline in January (from -1.4% to -1.8%), February (from -0.7% to -1.1%) and March (from -3.3% to -3.7%).

    The quarter-on-quarter seasonally adjusted GDP has been revised downwards from -2.1% to -2.3%.


    VEB GDP Index *


    Growth Volume, bln. RUB
    Year-on-year, % Month-on-month, %, SA
    January 2015 -1,8 -1,7 4921
    February 2015 -1,1 -0,8 5746
    March 2015 -3,7 -0,6 5897
    Q1 2015 -2,2 -2,3 16565
    April 2015 -4,8 -0,8 6058
    May 2015 -5,4 -0,6 6032

    * Main principles and data sources


  • April

    VEB flash estimate suggests that GDP continued to decline in April 2015: it contracted by 0.6% month-on-month and was down by 4.3% year-on-year.

    Month-on-month GDP change: slowdown continued

    VEB GDP Index, January 1999 = 100, seasonally
    adjusted and adjusted by working days

    According to VEB estimate, seasonally adjusted GDP has been declining for four consecutive months. GDP in April contracted by 0.6% after a decline by 0.4% in March, 0.6% in February and 1.6% in January.

    The main factors behind this downturn were a decline in manufacturing (-2.0%), mining (-0.5%), and retail trade (-1.5%). By contrast, electricity and agriculture made a positive contribution to GDP growth, expanding by a respective 0.9% and 0.1%.

    Year-on-year GDP contraction reached 4.3%

    VEB GDP Index, year-on-year growth, %

    VEB estimate suggests that in April 2015 GDP decreased by 4.3% compared to the corresponding period of the previous year, after a decline of 3.3% in March 2015.

    The deepening of the current economic downturn has been mainly attributable to a deterioration in industrial production, transportation, and financial services. Moreover, the contribution of export duties that supported GDP growth in the first quarter has become negative.

    Comment by Andrei Klepach, Chief economist of VEB

    The economic decline accelerated in April suggests that the economy has not achieved a turnaround yet. The main factor behind this downturn is a weak consumer confidence. The household saving rate has increased further along with the contraction of real income. The unemployment rate has remained relatively low due to a significant contraction of real wages.

    The positive contribution of the fiscal sector observed in the first quarter was almost exhausted in April. Specifically, it was caused by defence spending, which turned negative in April and probably influenced on a slump in the machine-building sector. Moreover, a positive impact related to the spike of petroleum export during the first quarter was also exhausted‏.

    At the same time, the Rosstat data show that the investment activity has performed surprisingly well. A slight decrease in investment does not reflect a rapid drop in the supply of investment goods to the domestic market‏. A decline in imported machinery rapidly accelerated. The upward trend in the total industrial production was reversed in April due to a decline in machine-building and the production of construction materials. Private capital outflows speeded up to 12 bln.$ compared to 8 bln.$ in March. These tendencies increase the risk of hastening decline in investment activity in the coming months.

    Quarter GDP change in Q1 2015

    The first GDP estimate for the first quarter 2015, published by Rosstat, appeared to be lower compared to VEB GDP Index (-1.9% vs. -1.5%). Therefore, VEB GDP Index has been upgraded to comply with the official Rosstat first quarter data.

    The VEB revision resulted in a stronger year-on-year GDP decline in January (from -1% to -1.4%), February (from -0.3% to -0.7%) and March (from -2.9% to -3.3%).

    The quarter-on-quarter seasonally adjusted GDP has been revised downwards from -1.4% to -2.1%.


    VEB GDP Index *


    Growth Volume, bln. RUB
    Year-on-year, % Month-on-month, %, SA
    December 2014 -1,4 -1,6 4957
    January 2015 -0,7 -0,6 5799
    February 2015 -3,3 -0,4 5937
    March 2015 -1,9 -2,1 16693
    Q1 2015 -4,3 -0,6 6035
    April 2015 -1,4 -1,6 4957

    * Main principles and data sources


  • March

    VEB flash estimate suggests that GDP decline continued in March 2015. GDP contracted by 0.4% month-on-month and was down by 2.9% on annual basis.

    Month-on-month GDP change: slowdown continued

    VEB GDP Index, January 1999 = 100, seasonally
    adjusted and adjusted by working days

    According to VEB estimate, seasonally adjusted GDP has been declining for three consecutive months. However, GDP decline notably moderated since February. GDP in March contracted by 0.4% after a decline by 1.5% in January.

    The most important factors behind this downturn were deterioration in retail trade ( 1.2%) and construction ( 1.3%). By contrast, manufacturing and transport services made a positive contribution to GDP growth. Manufacturing marked the first month of expansion in 2015.

    Year-on-year GDP change: fall of 2.9%

    VEB GDP Index, year-on-year growth, %

    VEB estimate suggests that in March 2015 GDP decreased by 2.9% compared to the corresponding period of the previous year, after a decline of 0.3% in February 2015.

    Deepening economic downturn was mainly attributable to deterioration in net taxes linked to a former spike in oil and oil product exports in February. Moreover, negative contribution of construction was greater and financial sector activity has slowed down. At the same time, manufacturing demonstrated a slower pace of contraction in March.

    Comment by Andrei Klepach, Chief economist of VEB

    «In March there were certain signs of stabilisation on forex and financial markets. Net capital outflow decreased from 22 bln. in February to 3 bln in March. Rouble started to appreciate as well as inflation slowed. At this point however, we do not consider these trends sustainable. We believe that economy turnaround may be expected not earlier than in the second half of the year.

    In March we observed a further decline in consumption activity. Real income has also been on the negative trend while savings have resumed strong growth. According to our estimate, net saving rate reached double digit numbers in March for the first time since the summer of the last year.

    Investment figures were better than expected in Q1 with a slight month-on-month growth in March. However, we expect a further acceleration in investment decline in the coming months, taking into account a strong negative trend in construction and machinery sectors.

    Quarterly GDP change: negative for the first time since 2009

    According to VEB estimate, real GDP decreased by 1.5% year-on-year and by 1.8% month-on-month in the first quarter 2015. The main factors behind the economic slump were a downturn in trade and manufacturing.

    Main revisions of previous monthly GDP estimates

    VEB has significantly revised upwards the estimate of GDP dynamics in February. Year-on-year GDP decline was reduced from -2.1% to -0.3%. Month-on-month GDP decline was revised to -0.4% from -0.6%.

    The key factor behind the GDP upgrade was new data available from Custom Service, showing a significant increase in exports of oil and oil products. This increase has strongly outpaced preliminary data of MinEnergo that was used for the first GDP estimate.

    In April 2015, Rosstat revised 2014 GDP growth figures. A particularly strong downward revision refers to the first quarter of 2014. This has smoothed the year-on-year GDP decline in the first months of 2015, because of a more favorable base effect. However, the revision also resulted in a stronger month-on-month GDP decline in January, -1.2% vs -1.5%.


    VEB GDP Index *


    Growth Volume, bln. RUB
    Year-on-year, % Month-on-month, %, SA
    December 2014 0,9 0,5 6633
    January 2015 -1,0 -1,5 4872
    February 2015 -0,3 -0,4 5714
    March 2015 -2,9 -0,4 5837
    Q1 2015 -1,5 -1,8 16423

    * Main principles and data sources


  • February

    VEB flash estimate suggests that the GDP decline continued in February 2015. GDP contracted by 0.6% month-on-month and was down by 2.1% year-on-year.

    Month-on-month GDP change: contraction slowed down to 0.6%

    VEB GDP Index, January 1999 = 100, seasonally
    adjusted and adjusted by working days

    According to VEB estimate, seasonally adjusted GDP has been declining for two consecutive months. In February GDP contraction slowed to 0.6% after a 1.2% decline in January.

    The most important factors behind this downturn were deterioration in trade (-1.9%), manufacturing (-0.9%) and services (-1.2%), as well as net taxes. By contrast, construction and transport services showed signs of recovery, expanding by a respective 0.5% and 0.3%.

    Year-on-year GDP change: fall of 2.1%

    VEB GDP Index, year-on-year growth, %

    VEB estimate suggests that real GDP decreased by 2.1% year-on-year in February 2015, after a decline of 1% in January 2015.

    The worsening of economic activity mainly reflects a deterioration in manufacturing, trade and net taxes. In February the contribution of manufacturing has become negative, amounting to -0.3 p.p. (down from 0 p.p.), while the negative contribution of wholesale and retail trade went from -0.8 p.p. to -1.0 p.p.

    Comment by Andrei Klepach, Chief economist of VEB:

    “A slowdown in consumption since the beginning of the year has been the main factor behind the contraction in the economy.

    The slowdown is a result of constraints in the retail credit market and renewed growth of savings, which was caused by high deposit interest rates and increased uncertainty in the labour market.

    At the same time, seasonally adjusted monthly growth of real income of the population remained positive, despite accelerating inflation. A key factor that supported income growth in February was pension indexation.

    We believe that the decline in investment that was observed in January and February does not yet fully reflect the change in economic conditions. We expect a further acceleration in investment decline in the coming months, taking into account restrictive interest rates on new loans, high degree of uncertainty and a peak in foreign debt payments.

    According to our preliminary estimates, net capital outflow in February increased to 15 bln USD, up from 9 bln USD in January. This is a rather high level, given that population is becoming a less important player on the foreign exchange market”.

    First estimate of real GDP growth in January 2015 was revised

    As new data on January became available, VEB has revised up the estimate of year-on-year GDP growth in January from -1.2% to -1.0%.

    The key factor behind the GDP growth upgrade was a 28% increase in exports of oil products that partly softened the negative impact from trade and manufacturing. As compared with the previous month, the decline in GDP was revised up from -1.4% to -1.2%.


    VEB GDP Index *

    Growth Volume,
    bln RUB
    Year-on-year, % Month-on-month, %, SA
    October 2014 0,4 0,0 6481
    November 2014 -0,9 -0,4 6282
    December 2014 0,5 0,6 6367
    January 2015 -1,0 -1,2 5068
    February 2015 -2,1 -0,6 5837

    * Main principles and data sources


  • January

    In January 2015 the trend in economic growth sharply reversed, as the positive impact from booms in consumption and manufacturing production was exhausted by the end-2014.

    Month-on-month GDP change: contraction slowed down to 1.4%

    VEB GDP Index, January 1999 = 100, seasonally
    adjusted and adjusted by working days

    As compared with the previous month, seasonally adjusted GDP declined by 1.4% in January (annualized decline of 16%), which was the sharpest monthly contraction since January 2009. The most important factors behind this downturn were deterioration in consumer spending along with an increase in consumer prices, and an unfavorable base effect related to the December spike in manufacturing. In January, wholesale and retail trade contracted by 6.0%, manufacturing – by 2.4%, mining industry – by 1.4%. By contrast, the contribution of net taxes to GDP growth became positive for the first time in several months.

    Year-on-year GDP change: fall of 1.2%

    VEB GDP Index, year-on-year growth, %

    As compared with the same month of the previous year, real GDP decreased by 1.2% in January 2015 after having increased by 0.5% in December 2014. The fall in GDP was mainly driven by a contraction in wholesale and retail trade. Trade contributed negatively in January by – 0.8 p.p. (after a 0.2 p.p. positive contribution). The contribution of manufacturing declined to zero (down from 0.5 p.p.). At the same time, net taxes on products and imports experienced a slight positive trend. According to preliminary data, exports of crude oil showed signs of recovery, and there was an acceleration in the production of excise goods.


    VEB GDP Index *


    Growth Volume,
    bln RUB
    Year-on-year, % Month-on-month, %, SA
    October 2014 0,4 0,0 6481
    November 2014 -0,9 -0,4 6282
    December 2014 0,5 0,6 6367
    January 2015 -1,2 -1,4 5068

    * Main principles and data sources