Unexpected improvement in industry, Russia gives long discount on oil, ITI Capital is sold

August deflation continues in Russia, while industrial production did not fall in July. The economy is adapting to the sanctions

In July, the Russian economy, according to Rosstat, showed an amazing result, writes Bloomberg. Industrial production fell by only 0.5% year-on-year (forecast - minus 2.3%), and since the beginning of the year it has grown by 1%. Seasonally adjusted and in monthly comparison, it increased for the first time since the beginning of the year (by 1.2% versus June).

• It is noteworthy that Rosstat improved its estimate of industrial production growth in 2021 from 5.3% to 6.4%, and the high base effect forced it to worsen its assessment of dynamics in the first half of 2022: growth by 1.3% instead of 2.0% due to "pre-war" January and February. In June, industrial production fell by 2.4%.
• In the sectoral context, there is a noticeable increase in production in the extractive industries and oil refining, along with a rebound in pharmaceuticals, microelectronics and the textile industry, due to the outflow of foreign competitors. “The fact that production is ahead was expected,” Bloomberg quotes Sofya Donets, an economist at Renaissance Capital for Russia and the CIS. “But there is also an unexpected improvement in industry.”
• Surprisingly, even the auto industry rebounded, showing a decline (in terms of money) of 58% after 66% in May. In mid-August, AvtoVAZ announced the restoration of a five-day working week, and on the eve of the return to the Vesta conveyor with airbags.
• The figures suggest that the fall in Russia's GDP will not be as deep as it seemed in March-April. In the first half of the year, the economy contracted by 4%, the Central Bank predicts 4-6% for the year. Alexander Isakov, an economist at Bloomberg Economics for Russia, says the data confirms the forecast for a 3.5% fall in GDP.
• At the same time, data on another week of deflation came out on Wednesday. By August 22, prices were down 0.15% after 0.13% deflation in the week to August 15 and 0.08% in the week to August 8. Taking into account the fact that in June and July there was also deflation (0.35% and 0.39%, respectively), deflation for all three summer months is practically guaranteed . In annual terms, inflation slowed down to 14.6%.

What do I get from this?

The economy is somehow adapting to the sanctions, and business, according to fresh monitoring , is improving short-term expectations again. But economists expect the summer lull to end in autumn, when both the deflationary trend and the industrial production trend reverse as the European oil embargo comes into effect, government spending increases and imports expand after the sanctions shock. The Central Bank believes that the bottom point of the fall in GDP will be passed in the first half of 2023, but even in this case, further dynamics are most important: the regulator no longer expects growth before 2025, even in the baseline scenario .

MONEY

Russia offers long discounts on oil

Russia has offered several Asian countries to provide a 30% discount on their oil and fix it in long-term contracts, writes Bloomberg. This is a way to cushion the blow from the price cap and find buyers for the oil released by the EU oil embargo. The current discount is noticeably lower - about $20 at a Brent price of $100, the G7 countries discussed a price ceiling of $40-60 per barrel.

The discount was offered to Indonesia (local officials have hinted that it does not cover the risks of US sanctions) and presumably India. US Deputy Treasury Secretary Wally Adeyemo is currently in India, coordinating a coalition of countries on an oil ceiling. According to local media reports , the country's authorities are not eager to join the coalition and will set the condition for the unlikely consensus of all buyers. Meanwhile, Iran is eyeing Russia's share of the European oil market , tired of selling oil in Asia at a discount and hoping for the lifting of sanctions on the nuclear deal.

Ex-head of SberCIB may buy a broker from Da Vinci

According to Frank Media, Andrey Shemetov, former senior vice president of Sberbank, ex-head of SberCIB, is going to buy (or has already bought) a controlling stake in the Russian broker ITI Capital from Oleg Zhelezko's Da Vinci Capital investment fund. Sources of the publication say that the deal is connected with the pressure of investors who insist on the exit of Da Vinci from assets in Russia. ITI Capital was firmly among the top 10 brokers on the Moscow Exchange and served more than 40,000 individuals and legal entities. Shemetov, after leaving Sberbank, was looking for a similar asset in May, writes Frank Media, but it is possible that the deal will not take place following the results of due diligence, which ends at the end of August.

RUSSIAN NORM!

On the channel "Russian norms!" Live with Microsoft Chief Economist Mikhail Schwartz!

On August 25 at 19:00, Elizaveta Osetinskaya (recognized by the Ministry of Justice as a foreign agent) will broadcast live with a unique guest who has not previously spoken to a Russian-speaking audience.

Mikhail Schwartz is a scientist and chief economist at Microsoft. Prior to that, he worked as an economist at Google for six years and was head of economic research at Yahoo!. He has taught in the economics department at Harvard University and holds a Ph.D. from the Stanford Graduate School of Business and a master's degree in physics from the University of California, Davis.

Live on Russian Norms! Mikhail will talk without cuts about where the world economy is heading, what awaits a world without Russian resources, whether a complete embargo is real, how the war in Ukraine affects the world economy, and whether we are in for the end of the era of globalization.

On August 25 at 19:00 connect to the air and ask your questions!

LABOR MARKET

"Slippery Road Down"

The Bell spoke with Vladimir Gimpelson, one of Russia's leading labor market specialists, director of the HSE Labor Research Center.

To the main question - why is unemployment in Russia so low with obvious signs of a crisis - he gave as many as five complementary answers. In an interview, he also said:

• which areas have been hit the hardest by the economic crisis;
• whether to wait for protests and strikes due to economic difficulties;
• why the "fashion" for higher education will continue even in times of crisis;
• what is the danger of the coming "employer's market".

Read all interviews here .

What else happened

The ex-mayor of Yekaterinburg, Yevgeny Roizman, will not be brought to Moscow for investigative actions. Today, one of the last prominent representatives of the opposition remaining in Russia was detained for two days in a criminal case on discrediting the Russian Armed Forces, he faces up to five years in prison.

Independence Day of Ukraine was not without incident: the Ukrainian authorities reported a rocket attack on a train at the Chaplino station in the Dnepropetrovsk region, 15 were killed. British Prime Minister Boris Johnson came to Kiev for the holiday, and Joe Biden timed the largest and longest-term US military aid package worth $ 3 billion to coincide with it. The Washington Post released the third long read about the war, dedicated to the reasons for the failure of the Russian attack on Kiev.

The export of oil and oil products from the United States against the backdrop of the energy crisis in Europe reached a historic high - last week, 11 million bpd left the country's ports. Oil accounted for more than a third of this volume.

RBC announced a change in the owner of the Vedomosti newspaper. He is now a native of the magazine "Expert", the former deputy editor-in-chief of RBC for media projects, the former deputy editor-in-chief of the information service of the REN TV channel Oleg Leonov.

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