This post first appeared on Russia Insider
Retail Sales improved for a third consecutive month reaching the yearly rate of 1.7% beating consensus forecasts of 1.5%. The improving trend in Retail Sales is particularly important given how important Q4 is for the retail sector.
Industrial Production, as already reported, surged to its highest level in 2 years growing by 2.8% on the year smashing the 0.3% expectations on the back of sanctions boosting food production, the Chinese gas deal boost metal production and a long awaited return of the real-estate market boosting other construction items.
Some may be tempted to point out that agriculture is booming because of the sanctions ban, but in reality, this year's crop is related to weather conditions, productivity improvements and the amount of seed planted last year. Agriculture registered a stunning 17% year on year gain as the sector sees a surge in productivity.
The combination of agriculture and the Index of paid services (which grew at its fastest rate in 2014 growing by 1.9% in September) almost contribute as much to Russian GDP as retail sales do - thus their strong growth is extremely encouraging for September's GDP. These three components alone make up just under 70% of Russia's GDP.
In my analysis of August's economic data, I highlighted how important the PPI (producer price inflation) indicator is for the Russian economy. The PPI fell to 3.5% the second lowest level of the year which is critically as weaker producer prices today convert into weaker consumer prices in the future.
Real disposable income remained weak coming in at 0.6% for the month which indicates consumers may cut back on spending in months to come.
Finally, the most disappointing part of the data was investment in fixed capital which again contracted by 2.8% in September - taking the year to date rate to -2.5%.
It is worth noting that the worst of the investment contraction came in at the beginning of the year (before Crimea), for example in January where it shrunk by 7%.
This post first appeared on Russia Insider
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