Russia’s economic recovery still uncertain

October figures for seasonally and workday-adjusted industrial output showed slight improvement from September, even if they were roughly unchanged from the final months of 2015 and last spring. Russia has experienced spurts and lulls in industrial output growth since February 2015, but the level has remained nearly unchanged. In the case of extractive industries, output declined slightly in October, while manufacturing output rose slightly. The on-year trends for both output categories have displayed some weakening in recent months.

Russia’s domestic demand has shown a two-track trend in recent months. The volume of retail sales (seasonally adjusted) continued to fall slightly in October, continuing a slide of 22 consecutive months. The volume of trade was down 4.4 % y-o-y, and 15 % below the October 2014 level. Real household disposable incomes contracted, falling nearly 5 % y-o-y in October. The trends in household borrowing and bank deposits have provided little support for consumption.

The on-quarter slide in fixed investment eased in the third quarter, and was even slightly up from a year earlier, when investment plummeted. For the first nine months of the year, fixed investment was down 2.3 % y-o-y.

The first official Rosstat figures for Russian 3Q GDP suggest a contraction of 0.4 % y-o-y. For the first nine months of the year, the contraction was 0.7 % y-o-y. The Central Bank of Russia and the economy ministry estimate that seasonally adjusted GDP in 3Q was roughly at the same level as in the previous quarter. The 3Q GDP was boosted by Russia’s bumper harvests.

Development of Russian retail sales and industrial output

Source: Rosstat.