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Putin Is Wrong, Russia Economy Hasn't Bottomed Out Yet

An upturn may still be a stretch ahead -- Rapoza is someone who thinks for himself and often goes against the consensus in the west so definetelly worth hearing out - even when he has bad news

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Originally appeared at Forbes


Vladimir Putin reiterated that his country’s economy has hit bottom and is ripe for a rebound. He might have to wait a little bit longer for the bounce.

Russian real sector data for November came in mixed on Thursday, with retail sales,  unemployment and industrial production worse than expected.

Retail sales fell 13.1% year over year, worse than the 11.5% market estimates. The decline likely means consumption declined in the fourth quarter.

“This will cause the recession to be extended for at least a sixth quarter,” says Daniel Hewitt, a Russia economist with Barclays Capital in London.

Real wages fell 9.0%, but that’s better than the 11% decline in October. Unemployment on the other hand rose to 5.8% from 5.5% in October, so within any margin of error.

Russian industrial is still negative, falling 3.5% on the year. Consensus estimates had it at -2.9%. The good news is that the negative numbers are not as high as they were a few months ago. They’ve been on the upswing for the past six months, but are still in the red.

Russian PMI remained slightly above the neutral “50” level for the second month, implying stable production in the future.

Investment is still negative, but less negative than before. It fell 4.9% from November 2014 levels, beating consensus drops of 5.4%. Corporate profits have increased in 2015, particularly in the energy sector, and mainly because of the depreciation of the ruble (down around 16% in the last 12 months).

Putin spoke of a bottoming out of the economy back in October during VTB Capital’s Russia Calling investor conference.

“Some experts believe, and I see eye to eye with them, that the trough of the crisis has been reached and the economy is adjusting itself to the changed environment,” he said at the Crowne Plaza Hotel conference center in Moscow. “Despite the fact that many sectors of our economy are still witnessing a decline, other sectors are looking up.” He singled out agriculture, which has benefitted somewhat from a ban on certain European food imports.

Putin reiterated his bottoming out call on Thursday during his annual Q&A with reporters in Moscow. 

The Russian president drew applause from reporters when he criticized Turkey for shooting down a Sukhoi SU-24 fighter plane last month. The Russian military now has an advanced air defense system in place in Syria which would be activated immediately to fire at targets hostile to Russian military assets. In other words, the Turkey jet that gunned down the Russian pilot would have also been shot out of the sky by Russian missiles parked in Syria.

Putin praised Secretary of State John Kerry for agreeing to stand down on Washington’s Bush-era regime change policy with regards to Syrian leader Bashar Assad, The New York Times reported today from Moscow.

In the market, Russian equities continued to outpace the broader MSCI Emerging Markets Index, down 0.16% on Thursday to the index’s decline of 0.6% in intraday trading. Despite free-falling oil prices, the high volume Market Vectors Russia (RSX) exchange traded fund is up 6.15% year-to-date, while the MSCI EM is down 16% and the S&P 500 is flat.

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