Russia's real sector data point to possible recession trend moderation

Real sector data for August were mixed. Business indicators were better, implying positive momentum change, with the rate of decline moderating. In particular, real investment improved to -6.8% y/y from -8.5% in July, much better than expectations that had foreseen further deterioration. Perhaps, investments are starting to benefit from the improvement in profits that has taken place in 2015 (Figure 1). In addition, industrial production grew to -4.3% y/y from -4.7% in July (Figure 2). Improvements were expected in this case because of base effects.

As an offset, consumption indicators were largely worse than expected. Real wages deteriorated considerably to -9.8% y/y from -9.2% in July (Figure 3). This was worse than expectations that had foreseen a slight improvement. Retail sales stayed low at -9.1% y/y, slightly better than July and unemployment was unchanged, as expected. This implies that further downward adjustment in consumption could be under way in Q3.

"Overall, these data suggest that declines in real GDP continued in Q3 15, but that momentum improved. In Q2 15 real GDP fell 2.0% q/q, accelerating from the Q1 15 decline of -1.6% q/q. We are forecasting that the decline in Q3 real GDP will be one half to one third of the rate of decline Q2. This would mean that the recession is still in place, but is starting to show signs of bottoming out", says Barclays.