Russia's economic growth indicators signal extended recession

Russia growth indicators for July deteriorated further. In particular, real wages declined 9.2% y/y from an unrevised -7.2% and revised -8.6% in June and investment fell 8.5% y/y from -7.1% in June. Retail sales, industrial production and unemployment improved slightly and were moderately better than forecasts.

Moderate improvement had ben expected in all these variables, signaling a bottoming out of the recession. Instead the data point to further worsening of the recession in Q3. 

"However, the rate of decline will likely moderate from the steep rate in Q2 when real GDP fell 2.5% q/q, nearly double the Q1 rate of decline. Growth is forecasted to record -4.0% in 2015 and be slightly negative in 2016 (because of base effects). However, there are downside risks to forecasts if the economy continues to deteriorate into Q4", says Barclays.

The drop in global oil prices is a factor extending the duration of to Russia's recession. In our view, imports, consumption and investment had already largely adjusted to previous declines in oil prices and the impact of sanctions.