Pivdenny Bank macroeconomic review: November results


The fall in the industry in October deepened from -1.1 % y/y in September to -5 % y/y. In general, the recession was observed in most industries. Thus, against the backdrop of adverse external conditions, the decline in metallurgy amounted to -11.9 % y/y, which led to a decrease in output in the mining and coke industries. In the engineering and food industries, these rates were -5.8 % y/y and -4.3 % y/y, respectively. However, some industries have maintained an upward dynamic – the chemical and pharmaceutical industries.

Meanwhile, construction in October increased by 14 % compared to October last year, thanks to the growth of non-residential real estate and engineering structures, which indicates the continuation of high investment activity. In addition, despite the slowdown in nominal and real wages, as well as a slight deterioration in consumer sentiment, retail growth accelerated to +11 % y/y from +8.6 % in the previous month. Thus, investments and private consumption remain key drivers of economic growth.

In October, inflation decelerated to 6.5 % y/y, coming close to the NBU target range. Consumer price growth was 0.7 % during the month, which is 0.7 percentage points lower than in the corresponding period last year (which explains the slowdown in inflation). Among the key drivers of price increases were growing prices for eggs and vegetables against the backdrop of reducing supplies and increased tariffs by mobile operators. At the same time, thanks to the strengthening of the Hryvnia, transport services became cheaper and the government reduced gas tariffs. The current dynamics of inflation contributed to the continuation of the monetary easing policy by the regulator.

In October, the current account deficit fell to USD 0.7 billion compared to September from USD 1.1 billion (large interest payments on foreign debt were made in September). High yields remain a key driver of export growth, and low energy prices contributed to a slowdown in imports. At the same time, metallurgy is experiencing a downward dynamic in exports amid a slowdown in production and negative price movements as a result of a slowdown in global growth. Domestic demand remained high, driven by the rapid growth in imports of engineering products. Meanwhile, a USD 0.5 billion surplus was recorded in the financial account, thanks to Cargill's borrowing from the government and the growing real sector debt on trade loans. However, for the first time in five months, the balance of payments was combined with a deficit of USD 0.1 billion. As a result, international reserves dropped slightly to USD 21.4 billion, which remains sufficient to cover 3,4 months of future imports.

Detailed macroeconomic reports can be found here link.