Russian economy started to recover again in January-February

Following weaker performance at the end of last year, the Russian economy appeared to get back to the track of slow growth in the first two months of this year. The engine of recovery seems to have shifted from last year's primary production to a broader base, but the development is still shaky.

Retail sales rose by 2 % y-o-y in January-February. This represented a slight slowdown from the end of last year, even if real wages rose by over 10 % y-o-y. The spurt appears to have come largely from certain public sector wage hikes prescribed by president Putin back in 2012. Real incomes, however, still contracted by nearly 1 % y-o-y, although the last year's point of reference is raised by the 5,000 ruble one-time pay-outs to most pensioners (if the pay-out is ignored, real incomes rose by 2.5 % y-o-y).

In contrast, growth in industrial output accelerated in the first two months of the year, mainly thanks to support from manufacturing. Manufacturing recovered briskly in January-February, rising 3 % y-o-y. Metal fabrication and the car industry were among the main growth drivers. Growth in output of extractive industries slowed to under 1 %, with oil & gas production levels declining from a year earlier. Pipeline transmission volumes also fell, weighing on growth of the entire transport sector. Construction activity remained unchanged from a year earlier in January-February, mainly on strong growth in housing construction.