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Russia Output & Demand - October


Rosstat has published its October statistics pack on economic conditions.

Unemployment increased to 5.5%, from 5.3% in September. More importantly, the seasonally adjusted unemployment rate ticked up further (now at 5.6%).

Real retail sales growth ticked up 0.5pp to 3.5% YoY, normalising after the sharp drop last month.

Investment in fixed capital kept contracting and shrank 1.9% YoY, still disregarding the favourable base effect. Underlying trend growth worsened and printed a 4.4% decline. This surprised us and consensus to the downside.

Construction declined 3.6% YoY, after the 2.9% YoY drop a month ago.

Real wage growth slowed to 4.1% YoY, from the downwardly revised figure in September (to 6.3% YoY).

Agriculture output growth spiked to 26.3% YoY, from a decline of 1.4% YoY a month ago.

The stellar growth in the agriculture sector was the only bright spot in the overall downbeat economic report. With investments declining, IP stagnating, consumption moderating and wage growth slowing, the underlying picture does not appear encouraging, and there is little to suggest a turnaround soon. Softening growth momentum, as well as the CBR’s evident reluctance to ease monetary policy, puts our already downbeat growth outlook for 2014 at risk.
Vladimir Kolychev, Daria Isakova
VTB Capital analyst

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