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Russia’s Retail Growth Probably Eased as Inflation Quickened

Oct. 17 (Bloomberg) -- Russian retail sales probably rose at the slowest pace in 20 months in September, while investment growth decelerated for a sixth month as inflation gathered pace.

Receipts at Russian merchants advanced 4.2 percent from a year earlier, the weakest since January 2011 and less than August’s 4.3 percent increase, according to the median forecast of 17 economists in a Bloomberg survey. Business spending to boost capacity grew 2.1 percent, down from 2.3 percent the previous month, a second survey showed. The Moscow-based Federal Statistics Service will publish the data this week.

Russia, where household spending accounts for half of gross domestic product, is facing a slowing economy as rising prices erode spending power. The central bank last month unexpectedly increased interest rates, signaling that concerns over inflation outweighed the dangers of an economic slowdown.

“Accelerating inflation is eating into growth in nominal incomes and wages,” Alexander Morozov, chief economist for Russia at HSBC Holdings Plc in Moscow, said yesterday by telephone. “Retail lending peaked and is growing more slowly. That has only just started and will be a factor for the next 12 months.”

The Micex Index of 30 Russian stocks added 0.1 percent to 1,457.63 as of 12:05 p.m in Moscow. The ruble strengthened for a second day against the dollar, appreciating 0.4 percent to 30.79.

Lending Slowdown

Loans to households grew 2.5 percent from the previous month in September, the slowest since March. Domestic consumption is supported by lending and improvements in the labor market, according to Bank Rossii.

Real wages increased 7.3 percent from a year earlier, down from 7.8 percent the previous month, according to the median estimate of 14 analysts in a Bloomberg survey. Disposable incomes also grew more slowly, rising 5.4 percent compared with 7.2 percent, another survey showed.

Consumer prices advanced 6.6 percent in September, breaching the top of the central bank’s 5 percent to 6 percent target range for this year after bad harvests from the U.S. to Russia drove up food costs and delayed utility-price increases year took effect.

Slower lending growth is already hurting car sales for September, Maxim Oreshkin, chief economist at VTB Capital in Moscow, said by phone. Russian car and light vehicle sales advanced 10 percent from a year earlier in September, matching the weakest pace since growth resumed in 2010, the Association of European Businesses in Russia said Oct. 8.

Labor Outlook

“The economic slowdown still hasn’t affected unemployment, but the rate may reach 5.8 percent by the end of the year,” Maria Pomelnikova, an analyst at ZAO Raiffeisenbank in Moscow, said by telephone.

The rate may have risen to 5.3 percent last month from 5.2 percent in August, according to the median estimate of 13 economists polled by Bloomberg.

Investment may have slowed in September as general economic uncertainty and higher borrowing costs discouraged spending by companies, Vladimir Osakovskiy, chief economist at Bank of America Merrill Lynch, said by phone. State preparations for last month’s Asia-Pacific Economic Cooperation summit in Vladivostok, a major source of government investment this year, has also ended, contributing to the slowdown, according to Raiffeisenbank’s Pomelnikova.

“There is still government investment, but its growth isn’t enough to break the negative trend.” Osakovskiy said.

To contact the reporter on this story: Olga Tanas in Moscow at otanas@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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