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The Performance of Business and Consumer Sentiment for Early Estimates od GDP in Russia: Old Turning Points and New Challenges of the Corona Crisis

This study proves the efficiency of the results of business and consumer surveys for the first early estimates of GDP growth in Russia. For the expert community, the use of this alternative information, which is not revised over time and covers major economic activities, is essential when up-to-date traditional statistical information are not available, are often revised, and published with a delay. The main hypothesis of the joint cyclical sensitivity of flash estimates of aggregate entrepreneurial behaviour and reference statistics on GDP growth is tested. For this purpose, the authors calculate the composite economic sentiment indicator (ESI), which combines 18 indicators based on the results of surveys of approximately 24,000 entrepreneurs in all main economic activities and 5,100 consumers. The empirical patterns, cyclical movement, the correspondence of turning points in GDP growth and ESI dynamics, and GDP expected estimates are identified through the joint testing of the analysed series. The authors present the results of cross-correlations, Hodrick-Prescott statistical filtering, a long-term interrelation, and a two-dimensional vector autoregression model. Statistically significant test results and the pattern of the impulse response function allow us to evaluate the quarterly nowcasts of GDP growth with the maximum predictive period of four quarters. Three scenarios of expected impulses in the dynamics of aggregate economic sentiments, different in strength and duration of their impact on further economic growth, are formed; these impulses include new crisis shocks for the Russian economy, which have been growing since March 2020. The resulting options of assessments reflect the possible amplitude of the decline in GDP growth from mid-2020, after COVID-19 containment measures and the collapse of oil prices. According to the results, the first signs of a recovery in low economic growth rates are possible only by mid-2021.