9 May 2022 | 6:05AM BST

Russia: Economic Activity and Policy Tracker — May 7

In this comment, we publish a variety of high frequency indicators to track the Clemens Grafe
+44(20)7774-3435 |
impact of Russia’s invasion of Ukraine on the Russian economy. We group them in clemens.grafe@gs.com
Goldman Sachs International
Activity Indicators, covering mostly consumer and external trade, Inflation Indicators,
and Financial Stability Indicators covering the banking sector, financial markets and
the CBR’s reserves. Last week’s Tracker can be found HERE.

The Russian economy continues to recover from the initial shock in late February and
early March. Our CAI suggests economic activity is about 10% below pre-crisis
levels and suggests that it is stabilising at this lower level which is largely consistent
with our high frequency activity indicators. Concerns about financial stability are
fading, the RUB has strengthened back to early 2020 levels. Our proprietary FCI
shows that Russian financial conditions have improved mostly on the back of
narrowing CDS spreads as Russia paid principal and interest on Eurobonds in USD.
Although sequential inflation momentum continued to decline and is somewhat
stable around 0.2%wow for now, we expect yoy dynamics to further edge upwards
somewhat. Further out, we expect sequential momentum to pick up again as
inventories run down although this is conditional on how effectively and quickly
imports can be substituted away. Overall, mid-term developments will depend on
how effectively Russia can substitute imports and redirect (energy) exports as we
continue to monitor any signs in the PMI subcomponents and the Urals-Brent
spread. In our view, the current RUB levels are too strong for the liking of the CBR
(and the government’s budget) and we expect further easing of capital controls.

Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html.
Goldman Sachs Russia

Activity Indicators

Exhibit 1: High Frequency Consumer Spending Data Suggests Retail Exhibit 2: Black Sea Russian Vessel Deadweight Tonnage Around
Sales Stabilising 11% below Pre-Invasion in April 2021 Average; Tankers Stable, Containers Recovered
Description: Consumer Spending and Retails Sales (% yoy) Scaled to 2021 Average = 100

50% Consumer Spending 250 Bulkers Containers Tankers

Retail Sales
40%

30% 200

20%

10% 150

0%

-10% 100

-20%

-30% 50

-40%

-50% 0
Mar-20 Aug-20 Jan-21 Jun-21 Nov-21 Apr-22 07-Jan 24-Jan 10-Feb 27-Feb 16-Mar 02-Apr 19-Apr

Source: Sberbank, Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research

Exhibit 3: Gas Flows to Northwestern Europe (mcm/d) Remain Exhibit 4: Urals-Brent Differentials Stuck at Historical Lows
Stable

NW Europe CEE 5
180
0
160
-5
140
-10
120
-15
100
-20
80
-25
60
-30
40
-35
20
-40
0
Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22
03-Jan 18-Jan 02-Feb 17-Feb 04-Mar 19-Mar 03-Apr 18-Apr 03-May

Source: Bloomberg, Goldman Sachs Global Investment Research Source: Thomson Reuters Eikon, Goldman Sachs Global Investment Research

Exhibit 5: Retail Mobility Recovered After Easter But Fell Again Exhibit 6: Fall in Manufacturing PMI so Far Limited; PMIs Improved
in April
Impact for previous crises is peak-to-trough

20 1 Output New order Employment Suppliers' delivery times Stocks of purchases

Public Holidays Orthodox Easter
15
0
10
Retail and Recreation
-1
5 Grocery and Pharmacy

0 -2

-5 -3

-10
-4
-15
-5
-20

-25 -6
01-Feb 11-Feb 21-Feb 03-Mar 13-Mar 23-Mar 02-Apr 12-Apr 22-Apr 02-May GFC 07/08 Crimea Annexation Covid-19 RU-UA War

Source: Google COVID-19 Community Mobility Reports, Goldman Sachs Global Investment Source: Haver Analytics, Goldman Sachs Global Investment Research
Research

9 May 2022 2
Goldman Sachs Russia

Exhibit 7: Fall in Services PMI Sharper than in Manufacturing; Exhibit 8: Stocks of Finished Goods Have Recovered Significantly in
Recovered in April April But Still In Contractionary Levels
Impact for previous crises is peak-to-trough

1 55
Stocks of Finished Goods Suppliers' Delivery Times
-4

-9 50

-14
45
-19

-24
40
-29

-34 35
-39

-44 30
GFC 07/08 Crimea Annexation Covid-19 RU-UA War Jan-16 Sep-16 May-17 Jan-18 Sep-18 May-19 Jan-20 Sep-20 May-21 Jan-22

Source: Haver Analytics, Goldman Sachs Global Investment Research Source: Haver Analytics, Goldman Sachs Global Investment Research

Exhibit 9: Different From Previous Downturns, Export Orders Have Exhibit 10: Current Activity Indicator (CAI) Decline is Predominantly
Fallen by More than Average Driven by Soft Data
Hard data refers to indicators such as IP, Retail Sales whereas soft data
refers to survey-based measures

65 14
New Orders New Export Orders
Hard CAI Soft CAI
12

55 10
8
6
45
4
2
35
0
-2
25 -4
-6
15 -8
Jan-16 Sep-16 May-17 Jan-18 Sep-18 May-19 Jan-20 Sep-20 May-21 Jan-22 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22

Source: Haver Analytics, Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research

Exhibit 11: CAI Decline is Led by Manufacturing and Consumer

Sectors

14
Consumer Housing Labour Manufacturing
12
10
8
6
4
2
0
-2
-4
-6
-8
Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22

Source: Goldman Sachs Global Investment Research

9 May 2022 3
Goldman Sachs Russia

Inflation Indicators

Exhibit 12: Weekly Inflation Momentum (%wow) has Declined And Exhibit 13: Non-Food Goods Durables Inflation (% wow) and
Continues to be Stable Around 0.2%wow Medicines Inflation Have Fallen Disproportionately
Dashed line indicates average for the same period in 2021

3% 5%

2% 4%

Weekly Mar CPI Average

Non-Food Durables
3% Non-food Non-
2% Non-Perishables
Durables
Medicine
2% Food
1% Average
Perishables
1%
1%

0%
-2% -1% 1% 2% 3%
0%
Weekly Apr CPI Average
07-Jan 21-Jan 04-Feb 18-Feb 04-Mar 18-Mar 01-Apr 15-Apr 29-Apr

Source: Rosstat, Goldman Sachs Global Investment Research Source: Rosstat, Goldman Sachs Global Investment Research

Financial Stability Indicators

Exhibit 14: Real FCIs Have Reversed About 1/3 of the Initial Exhibit 15: Recent Loosening Mostly Due to CDS Spread as Default
Tightening in Early March Concerns are Fading for Now
7-Day Cumulative Contribution

01-Feb
150 45 CDS Spread Equities Long Rate Short Rate FX
40
140
35

130 30
25
120
20
15
110
10
100 5
0
90
-5
80 -10
01-Feb 11-Feb 21-Feb 03-Mar 13-Mar 23-Mar 02-Apr 12-Apr 22-Apr 02-May 08-Feb 22-Feb 08-Mar 22-Mar 05-Apr 19-Apr 05-May

Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research

9 May 2022 4
Goldman Sachs Russia

Exhibit 16: YTD Daily USDRUB Volume has Declined Significantly Exhibit 17: USDRUB On-/Offshore Dislocation has Normalised
Since the Invasion (mln USD); YoY Volume is Recovering

12000 120%
Offshore Offshore Onshore
Onshore 100% 140
10000 YoY Onshore
80%
60% 120
8000
40%
20% 100
6000
0%
-20% 80
4000
-40%

2000 -60% 60
-80%
0 -100% 40
11-Jan 28-Jan 16-Feb 09-Mar 28-Mar 14-Apr 05-May 01-Feb 14-Feb 27-Feb 12-Mar 25-Mar 07-Apr 20-Apr 03-May

Source: MOEX, Goldman Sachs Global Investment Research Source: Bloomberg, Goldman Sachs Global Investment Research

Exhibit 18: 6M Offshore and Onshore Rates have Diverged Again Exhibit 19: The Banking System is Stabilising and Repo Funding is
Declining (mil RUB)

100 6000000
Offshore Onshore
90

80 5000000

70
4000000
60

50
3000000
40

30 2000000

20
1000000
10

0
03-Jan 18-Jan 02-Feb 17-Feb 04-Mar 19-Mar 03-Apr 18-Apr 03-May 0
May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Nov-21 Feb-22

Source: Bloomberg, Goldman Sachs Global Investment Research Source: Haver Analytics, Goldman Sachs Global Investment Research

Exhibit 20: Banking Sector Back in Liquidity Surplus (bil RUB) Exhibit 21: Reserves Fell Sharply Post the Invasion but Have
Stabilised (bil USD), Recent Moves Mostly Due to Valuation Effects.

4000 660

2000 640
Liquidity Surplus

0 620

Liquidity Deficit
600
-2000

580
-4000

560
-6000

540
-8000 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22
24-Feb 06-Mar 16-Mar 26-Mar 05-Apr 15-Apr 25-Apr 05-May

Source: Haver Analytics, Goldman Sachs Global Investment Research Source: CBR, Goldman Sachs Global Investment Research

Clemens Grafe and Jonas Schmitten*

*Jonas is an intern in the CEEMEA Economics team.

9 May 2022 5