Russian real wages miss forecast, retail sales grow slightly

MOSCOW: Real wages in Russia rose less than expected in March and real incomes fell from the previous month, failing to provide the support needed for significant growth in the Russian economy, data showed yesterday.

Russia’s economy grew 1.5 percent last year after two years of recession, but fell short of a government target of 2 percent. Russia’s economy ministry has said it expects gross domestic product growth to accelerate in 2018. Data provided by Russia’s state statistic service, Rosstat, showing

activity in economy in the first quarter was “generally quite soft,” analysts at Capital Economics said in a note. “The outlook has, of course, been clouded by fresh US sanctions and the sell-off in Russian financial markets earlier this month,” they wrote.

The United States imposed new sanctions against Russia on April 6, targeting major Russian companies and some of the country’s most prominent businessmen in response to alleged Russian meddling in the 2016 US election and other “malign activity”. In March, before the sanctions were imposed, real wages rose 6.5 percent yearon-year and real incomes rose 4.1 percent, compared with a 4.3 percent increase in the previous month. Economists polled by Reuters had expected that real wages would grow by 8.8 percent in March. Retail sales, a barometer of consumer demand and Russia’s key driver of economic growth, rose 2.0 percent in March compared with a year ago after rising 1.8 percent in the preceding month.

“The weak recovery in retail sales was a surprise, given that we are seeing significant growth in real wages and disposable incomes,” said B&N Bank analyst Natalia Shilova. The World Bank said late last year that consumer demand was expected to be the main engine of GDP growth in 2017-2019 in Russia. Vladimir Miklashevsky, senior economist and trading desk strategist at Danske Bank in Helsinki, said the Russian central bank would not consider real wage growth as an inflationary risk at its meeting on April 27. “In its decision on the rate, the central bank, most likely, will emphasize the strengthening of inflation risks because of the growing volatility of the rouble due to geopolitical tensions,” Miklashevsky said. Inflation is likely to be the first economic indicator to feel the impact of the sell-off in Russian markets. Higher inflation could alter the central bank’s plan for further cuts to its key interest rate, now set at 7.25 percent.