Russia's economy weakened overall at the beginning of the third quarter, mixed macroeconomic data for July showed on Wednesday, strengthening the case for the central bank to cut interest rates at its next meeting in September, economists said. Income data was worse than expected, with Russian's real disposable income - a measure of how much cash households have left for spending after paying basic bills - fell 7 percent in annual terms.
Real wages also came in below expectations, rising only 0.6 percent last month. Bucking the trend was a less-than-expected drop in retail sales, a major measure of Russia's overall economic performance, even as Russians struggle with the impact of a commodity price slump and sanctions over the conflict in Ukraine. "Today's data supports our call for a 50-basis points rate cut at the (central bank) September meeting," ING chief Russia economist Dmitry Polevoy said in a note. The central bank left its main lending rate on hold at its most recent policy setting meeting in July, citing the need to maintain moderately tight monetary policy despite inflation in line with its forecasts.
Wednesday's data follows numbers released on Monday showing industrial output falling 0.3 percent in annual terms in July, while expectations were for a modest growth. "Overall, it looks like the deterioration in the industrial sector probably offset improvements elsewhere in the economy," Capital Economics' senior emerging markets William Jackson, wrote in a note.