The performance of the Russian economy was unexpectedly weak in Q2 as GDP grew by just 1.2% (y-o-y), intensifying pressure on the central bank to ease monetary policy. Anaemic investment and subdued household consumption have amplified the effects of depleted foreign demand for Russian energy exports. Industrial production barely increased in y-o-y terms in August, following July’s 0.7% contraction, partly explaining the downgrade to our panellists full-year estimate. Moreover, the PMI for manufacturing has remained in negative territory, suggesting a protracted recovery for the sector. Still, some upbeat data on business investment and retail sales have offered hope of an upturn in growth during the remainder of 2013. Capital investment, which accounts for approximately one-fifth of Russian GDP, increased by 2.5% (y-o-y) in July, its fastest pace of expansion since November 2012. Retail sales rose by a greater-than-expected 4.3% (y-o-y) over the same period.
The central bank held the refinancing rate at 8.25% on September 13, but indicated that it would be lowered once inflation reaches a target level of between 5% and 6%. While the CPI was unchanged at 6.5% (y-o-y) in August, it is down from 7.1% in January and the consensus is predicting that it will fall further by year-end.
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