BOFIT Viikkokatsaus / BOFIT Weekly Review 2022/39
Primary production, construction and certain industrial branches related to construction and defence (e.g. cement production and metal fabrication) supported the Russian economy in August. Driven by crude oil and liquefied natural gas, production of extractive industries was up in August by 1 % y-o-y. Natural gas production excluding LNG decreased by over 20 %. Agricultural output accelerated briskly, with production climbing by 9 % y-o-y in August. Construction activity rose by 8 % y-o-y in August.
Consumer-driven branches continued to perform poorly. The volume of retail sales in August was still down by 9 % y-o-y. Although inflation has slowed in recent months, consumer prices still rose by 14 % y-o-y in August. The rapid rise in prices has eroded consumer purchasing power, and the average real wage in July shrank by 3 % y-o-y. The labour market situation remained stable. The number of persons employed in August was about the same as in August 2021, and the official unemployment rate remained at a historically low level of around 4 %.
Industrial trends were weakest in branches most affected by sanctions or otherwise dependent on imports and foreign firms. For example, the EU ban on imports of Russian timber and wood products entered into force in July. The wood industry experienced a roughly 20 % y-o-y drop in July and August. Passenger car production, which is highly dependent on imported components and international firms, remained in the doldrums in August with production down by 70 % y-o-y.
Russia’s ministry of economic development estimates that Russian GDP contracted by 4 % y-o-y in August and 1.5 % in the first eight months of this year. The OECD forecast released this week sees Russian GDP contracting by 5.5 % this year and 4.5 % next year. The EBRD’s September forecast expects a drop of 5 % this year and 3 % next year.
Extractive industries and construction supported the Russian economy in August, but retail sales remained weak
Sources: CEIC, Rosstat and BOFIT.