Bank of Russia expects pace of investment to accelerate

The second quarter of 2017 saw further improvement in investment activity.  The Bank of Russia expects the annual growth rate of fixed capital investment in the April to June period to accelerate twofold compared to the first quarter, notes the June issue ‘Economy: Facts, Estimates and Commentary’, a BoR information and analytical commentary.

In May, construction returned to positive growth, reaching its highest levels since July 2013. Against this backdrop, there were signs of a continued recovery in construction material outputs, which emerged in April.

Increasingly robust outputs were also posted by the engineering industry. As a result of rebounding demand for machinery and equipment, there was a rise in both imports and domestic production.

Consumer demand continued to recover on the back of favourable developments in wages and household optimism. May's retail sales were up both on a month-on-month (seasonally adjusted) and annual basis.

As a further increase in consumer and investment activity is expected to occur in June 2017, the Bank of Russia estimates that industrial production will grow 3.4–4.0% on the same period last year.

With the recovery in May's industrial production poised to beat expectations, annual GDP growth in the second quarter may well move closer to the upper bound of the forecast range (0.9–1.3%).