Russia’s third quarter economic performance was surprisingly strong, but further gains are likely to be short-lived. Growth was driven by industrial production (up 3 %) and agricultural production (up 5 %). Forward-looking indicators, however, suggest that the outlook for industrial output is not rosy. For example, inventories have reached historical highs. Construction and transport activity were about the same as a year earlier.
Consumer demand remains modest. Despite the fastest rise in real incomes in years, on-year growth in retail sales slowed in July-September to below 1 %. Some observers suspect that the recorded 3 % growth in real incomes is overestimated. They are critical of the statistical methods used in determining income trends.
After posting growth in the first half of this year below 1 %, Russia’s economy ministry estimates that GDP grew at a nearly 2 % on-year pace in the third quarter. The ministry noted, however, that growth was largely based on transient factors such as inventory build-up and expects growth to slow in the fourth quarter of this year.