Russian macro: “Reality is not what it seems”
Rosstat recently released its usual monthly statistics for June and 1H26, with industrial data published last week. Around the same time, the CBR shared financial statistics as of July 1, including corporate and household credit figures. On Friday, July 26, the CBR cut the key rate by 25 bps to 14.00%, citing concerns over slowing economic growth, a growing budget deficit, and the risk of inflation picking up again by year-end. While inflation has eased somewhat in recent weeks, it’s still higher than over the same period last year, and even the latest reading of 0.04% w-o-w for the seven days ending July 27 didn’t change the picture much. Economic performance didn’t look impressive in 1H26 as basic sector output was up 0.2% y-o-y, while industry grew 0.4%.
Looking at various parts of the Russian economy, the picture seems more colorful and in some cases a bit brighter. For instance, construction, which was reportedly down 16.0% y-o-y in January, grew 3.5% in June, bringing the overall decline in the 1H26 to a more modest 5.0%. The December-to-January swings in construction data have also become much larger in recent years, making short-term trends harder to read. Consumer demand demonstrates a much better performance as expanding household credit is supporting retail sales. This may not pose an immediate issue for households, since total household credit will likely stay below 18% of GDP this year, meaning even high borrowing costs won’t heavily strain household balance sheets. Corporate credit, however, could easily surpass 40% of GDP by year-end, and high costs of borrowing may place pressure on some corporates.
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