Russia's Real Sector data confirm recession intensification

Russia's May real sector data were mixed, but on balance slightly negative. Investment-production indicators deteriorated in May. Industrial production declined to -5.5% y/y and investment fell to -7.6% y/y, both worse than expectations. 

To gain perspective, during the 2008-09 and the 1998-99 recessions, IP declines peaked at around -15% in both. Investment decline peaked at -25% y/y in 2009. Thus, the intensity of declines in investment during this recession may turn out to be milder. Alternatively, there may be more downside risk to growth during this recession.

Consumer demand indicators improved in May after having deteriorated sharply in April. In absolute terms, real wages and retail sales fell -7.3% and -9.2%, respectively, in May, an improvement over April. However, the severity of declines exceeds those in 2008-09, although they are less than the declines in 1998-99. This implies that the fall of consumer demand could be greater in this recession than in 2008-09 when it fell a total of 8pp. This implies considerable further deterioration, said Barclays 

Overall, Q2 real sector indicators confirm that the recession is intensifying. We retain our below consensus forecast that growth will decline in 2015 by -4%, adds Barclays