Economic activity in Russia expands in June

Economic activity was in the ascendant in June 2019, with its overall trend albeit remaining unsteady. Whereas consumer demand and industrial output improved, fixed capital investment continued to shrink, according to the new issue of ‘Economy: Facts, Assessments and Comments’. The current industrial rebound may prove unsustainable, however.

Annual industrial production growth accelerated to 3.3% in June (vs 0.9% in May). Manufacturing sectors emerged as key contributors to output growth (on the back of engineering outputs by several major companies). At the same time, the mining sector’s output posted a decline.

The downward trend in fixed capital investment continued into June. Weak investment activity is in many ways linked to lower government investment against the same period last year.

As a decline in real disposable household incomes slowed down, June saw a certain rebound in consumer activity. The somewhat improved consumer sentiment made a positive impact on household demand for goods and services.

The Russian economy has posted growth rates lower than Bank of Russia expectations for the year to date. This is due to weak investment activity trends and a significant drop in annual export growth rates, including on the back of weaker external demand.

The Bank of Russia estimates that annual GDP growth increased to 0.5-1% in 2019 Q2. In 2019 Q3, as national projects are implemented and public investments are expanded, the GDP growth rate will accelerate to 0.8-1.3%.