Depressed Russian demand and output continued in May

BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/26

​For the third month in a row, the volume of retail sales was down about 9 % y-o-y. The contraction for the first five months of 2015 was over 7.5 %. When seasonally adjusted and cleaned up for differences in the number of working days, retail sales held steady for the period following a large drop in January. Real disposable household incomes have declined gradually since autumn 2014. Real incomes in April-May were down about 5 % y-o-y.

Investment decline deepened in May, scoring about 7.5 % from May 2014. The on-going year-and-a-half contraction in the construction sector worsened in May. In the first five months of the year, investments were down nearly 5 % y-o-y and over 8 % from two years ago.

The slide in industrial output continued in May. The output was down about 5 % y-o-y in April-May. Most of this reflects the fall in manufacturing, down over 8 % y-o-y in May. Thanks to a relatively merciful first quarter, the on-year drop in manufacturing for January-May was 4 %.

Changes in Russian GDP, %
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Source: Rosstat

Economy minister Alexei Ulyukayev noted his ministry’s estimate that GDP contracted 3.2 % y-o-y in the first five months of this year. Deputy economy minister Alexei Vedev, who is tasked with forecasting and economic monitoring, reported that seasonally adjusted GDP contracted in May, but less than in previous months. State-owned Vnesheconombank (VEB) has also begun to release rapid GDP estimates. VEB calculates that GDP contracted 3.4 % y-o-y in January-May, and that the on-year drop in April-May was about 5 %. VEB’s chief economist is Andrei Klepach, Vedev’s predecessor who headed up macro economy at the ministry for many years. The latest Rosstat figures show GDP shrank 2.2 % y-o-y in the first quarter. After minor adjustments in the GDP data over many previous years, Rosstat now says seasonally adjusted GDP started to contract already in 3Q2014.

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