Russia's consumer squeeze continues but producers recovering

Russian economic data published by the state statistics service on Thursday painted a picture of slumping retail sales and real wages, but as in previous months there were signs producers are less hard-pressed than consumers. The data is being closely watched for evidence that Russia's economy, which has slumped as a result of low prices for its oil exports and Western sanctions linked to the Ukraine conflict, has reached a low point from which it will recover over the coming months.
The latest data helps to confirm the view of many analysts that the worst of the recession is over but that the expected recovery will be slow. "October's activity data from Russia suggest that the slump in the economy continued to ease at the start of the fourth quarter," Capital Economics emerging market economist Liza Ermolenko said in a note. "This was driven by the industrial sector, but conditions in consumer-facing sectors actually worsened." She added that the figures were probably pulled down by there being one less working day this year compared with October 2014.
The data showed retail sales falling by 11.7 percent compared with a year earlier, steeper even than a 10.4 percent fall the previous month. Real wages also fell by a double-digit amount, down 10.9 percent year-on-year compared with a 9.7 percent decline in September. Both indicators were weaker than forecast, with analysts polled by Reuters predicting 9.6 percent declines in both retail sales and real wages.
Russia's consumers are being squeezed by high inflation, after the oil price slide dragged down the value of the rouble. Nominal wages rose by just 3 percent, compared with inflation of 15.6 percent. But the fall in capital investment was less steep than in the previous month, continuing a pattern seen in September and August. Capital investment was down 5.2 percent compared with a year earlier, after a 5.6 percent fall in September and a 6.8 percent fall in August.
This follows industrial output data earlier in the week suggesting an industrial slump is slowly easing, with October's 3.6 percent decline easing from a 3.7 percent fall in September. "We'd view the release as largely positive," said Bank of America Merrill Lynch economist Vladimir Osakovskiy. "Investment seems to be on the recovery track, which is more important (than consumption), as we expect investment to be the main driver of the economic recovery next year."