Retail slowdown points to weaker Russian economy
The data underscores the economic challenges facing the new government appointed on Monday by President Vladimir Putin following his election in March.
Retail sales rose by 6.4 percent in April compared with a year earlier - a decline on the 7.3 percent growth recorded in March, and below analysts' expectations of 7.0 percent growth in April.
On the positive side, investment growth saw a partial recovery after slumping the previous month, rising by 7.8 percent year-on-year in April compared with 4.9 percent growth in March.
Alexander Morozov, chief economist at HSBC in Moscow, said that the disappointing level of consumption growth was more significant than the pick-up in investment.
"We definitely see more signs of weakening consumer demand," he said.
"Investment demand is still doing OK, but ... private investment still appears to be quite weak, which is why I would not be too encouraged by strong fixed investment numbers."
He said that the stronger investment growth in the state sector was probably the result of temporarily higher government expenditures linked to March's presidential election.
The mixed data adds to conflicting signals about the strength of the Russian economy. While gross domestic product rose by an unexpectedly strong 4.9 percent in the first quarter, industrial output growth was just 1.3 percent in April, as a
global economic slowdown bites into Russian exports.
Tight labour market
Data on wages and unemployment, also published by the Statistics Service on Monday, provided further evidence that the economy is heading for a slowdown.
Unemployment hit a four-year low of 5.8 percent in April, down from 6.5 percent in March, pointing to tight labour market conditions and limited slack in the economy.
"Companies may be tempted to hike prices rather than output, which promises higher inflation down the road rather than higher economic growth," Morozov said.
Nominal wages rose by 14.3 percent year-on-year in April, slightly higher than March's 13 percent growth rate, but a decline compared with 15-16 percent nominal growth recorded in January and February.
The Statistics service said that it was revising down its wage growth estimates for March - previously 16.8 percent in nominal terms and 12.6 percent in real terms - after receiving more complete accounting data from companies.
While real wages growth was still a strong 9 percent in April, economists noted that this reflected record low inflation that is expected to be temporary. Inflation is set to rise in the second half of this year, after the government enacts a delayed increase in household utility prices.
"We believe the expected mid-year rise in utility prices will eat away at real spending power," economists at Renaissance Capital said in a research note, adding that "retail loan growth is also bound to moderate from current sizzling levels".
Citigroup economist Natalia Novikova said that consumption growth may also be slowing down because of high interest rates on retail loans, and a desire by consumers to rebuild savings after a decline in the savings rate.
"One way or another we will see a decline in consumer activity: the effect of higher wages will go away, and the rise in the savings rate will hold back (consumption)," she said.
Source: www.reuters.com