Reasonable recovery in Russian domestic demand; growth in output slower

The recovery in seasonally adjusted retail sales continued in April. From twelve months earlier retail sales were up nearly 2.5 %. Real household incomes also rose by several per cent in on-year terms in the first four months of the year. The recovery in fixed investment slowed a bit from last year. Fixed investment in the first quarter was up 3.5 % y-o-y. After a long period of decline, construction activity also revived in April.

As in previous recoveries, the revivals of domestic demand increased imports, even if import growth has slowed in recent months. Domestic production has grown much more slowly. Rosstat reports that first-quarter GDP grew by 1.3 % y-o-y.

Retail sales and industrial output in Russia, 2014−18

Source: Rosstat.

Signs of industrial recovery are still unclear. While seasonally adjusted industrial output has increased in recent months, April industrial output was still on par with the level of early summer 2017. In the first four months of this year, on-year growth of industrial output was less than 2 %. In extractive industries, which include oil and gas, on-year growth was just over 1 %. Manufacturing in the period was up 2 % y-o-y, but in recent months manufacturing output has remained essentially flat.