BOFIT Viikkokatsaus / BOFIT Weekly 2017/42

On the consumption side, the recovery seemed to strengthen, with retail sales rising 3 % y-o-y in September. Retail sales growth accelerated sharply, even with meagre income development. In other words, most consumption growth was funded by credit or savings. Real wages were up less than 3 % and real incomes continued to contract slightly despite historically low inflation.

On the production side, third-quarter growth was supported by agriculture, which saw output increase by nearly 9 % y-o-y in September. The high growth partly reflects a later harvest than in 2016, but the overall harvest this year is expected to be even larger than last year's bumper yield.

The extractive sector and related transport, which led growth of the economy in the first half, lost steam in September as well as in the entire third quarter. With the decline in oil production in September, total mineral extraction remained unchanged from a year earlier. Growth in the transport sector slowed significantly as pipeline transmission volumes plateaued. Manufacturing output increased by 1 % y-o-y, but that increase was partly supported by an output spike in the highly volatile transport equipment branch.

Rosstat's revision of its earlier published growth figures meant that the outlook for the construction sector darkened considerably in September. The new numbers suggest that construction only achieved faint positive growth very recently. For the first nine months of the year, construction activity fell by 2 % y-o-y.