Russia's retail sales fell further in September but at a slower pace, suggesting its economic contraction is easing, data from the federal statistics service showed on Wednesday. Russia's economy has passed the most acute phase of an economic crisis, sparked by Western sanctions and low oil prices, and is now widely expected to return to growth in the next few months though the recovery is expected to be slow.
The statistics service Rosstat said retail sales fell by 3.6 percent in September compared with a year ago after falling by 5.1 percent a month earlier. The decline in retail sales, which reflect momentum in consumer demand - the economy's key growth driver - was smaller than a 4.5 percent contraction predicted by analysts polled by Reuters.
"Overall, the September data had more positive than negative surprises. On the positive side, we have stable unemployment, a slowing drop in consumption and, to some extent, some improvement in wages," Dmitry Polevoy, an economist at ING in Moscow, said in a research note. The monthly economic report showed that the unemployment rate remained steady in September at 5.2 percent. Real wages, which are adjusted for inflation, rose 2.8 percent. Analysts polled by Reuters had expected real wages to fall by 0.6 percent.
"The report was better than expected, which is in line with our expectations that Russia's economy may return to growth by the end of the year," said Vladimir Osakovsky, an economist at Bank of America Merrill Lynch. Other economic indicators suggest an economic recovery is not imminent however. Earlier this week, data showed industrial production fell 0.8 percent in contrast with analysts' predictions of 0.6 percent growth.
Many believe any economic recovery is likely to be anaemic as Russia faces budget shortfalls due to low prices for oil, its key export, while worsening political tensions with the West suggest Western sanctions imposed over Russia's actions in Ukraine, will remain in place for some time. Fitch Ratings says the Russian economy will struggle to return to pre-crisis growth levels in the next few years because consumer demand will stay weak as people save more and spend less.