Ruble Depreciates as Retail Sales Decline, PPI Continues to Rise

Russian ruble weakens as crude prices remain flat

The Russian ruble depreciated against the US dollar on Wednesday after strengthening by more than 1.5% in the previous two sessions. Oil prices were trading on a flat note on August 17 at 2:30 PM EST. An unexpected fall in US crude stock inventories was offset by speculations that Saudi Arabia is looking to increase its production supply to record levels. Crude stocks in the US fell by 2.5 MMbbls (million barrels) in the week ending August 12 following three weeks of expansion in the inventory levels. The Russian ruble is highly correlated to crude prices. A large portion of its revenues are derived from exporting petroleum and petroleum products.

Retail sales fall, producer prices rise

Retail sales in Russia continued to fall in July. They fell by 5% on an annual basis—compared to a decrease of 5.9% in the previous month. However, they released better than expectations of a 5.7% fall. The decline was led by a decrease in both food and non-food products.

Ruble Depreciates as Retail Sales Decline, PPI Continues to Rise

Producer prices in Russia rose by 4.5% on an annual basis in July—compared to a 5.1% rise in June. The rise in prices was seen across the manufacturing, utilities, and mining sectors. On a monthly basis, Russia’s producer price index rose slightly by 0.2% in July—compared to a 2.7% increase in June.

Ruble Depreciates as Retail Sales Decline, PPI Continues to Rise

Performance of key indices

The VanEck Vectors Russia ETF (RSX) provides exposure to companies that are publicly traded and domiciled in Russia. RSX fell by 0.21% on August 17 at 2:30 PM EST and the iShares MSCI Russia Capped ETF (ERUS) rose by 0.21%. Both indices have risen by more than 7.5% since the beginning of the month.

This negative trend was evident in Russian ADRs (American depositary receipts). Mobile TeleSystems (MBT), a Russian company, fell by 0.94% on August 17 at 2:30 PM EST. On the other hand, energy-related ADRs like Canadian Natural Resources (CNQ) fell by 0.22% and Baytex Energy (BTE) traded negative by 0.55% on December 17.