Russian Retail Sales Growth Eases to 35-Month Low

Russian retail sales grew at the slowest pace in almost three years in January as unemployment surged and inflation sapped household purchasing power.

Retail sales advanced 3.5 percent from a year earlier, down from 5 percent in December, the Federal Statistics Service in Moscow said today. Economists forecast a 4.8 percent increase, according to the median of 19 estimates in a Bloomberg survey. Unemployment jumped to 6 percent, the highest in 10 months, from 5.3 percent.

The world’s largest energy exporter is counting on the household spending that accounts for about half the economy to maintain growth as the euro area’s slump hurts demand for commodities. The government forecasts inflation will accelerate again this month, threatening consumer optimism and spending power and keeping pressure on the central bank not to use lower borrowing costs to spur growth.

“It further builds a case for more dovish central bank stance,” Dmitry Polevoy, an analyst at ING Groep NV in Moscow, said in an e-mailed response to questions. However, “stubbornly high headline inflation would still be a stumbling block on the road to lower policy rates. So we keep a view of an on-hold decision in the coming months with room for lower rates appearing not earlier than in late second quarter.“

The Micex Index of 50 stocks rose for a second day to close 0.8 percent higher at 1,522.69 in Moscow. The ruble gained 0.1 percent to 30.1075 per dollar.

Weak Expansion

Carmakers including Renault SA are facing a slowdown in demand in Russia, Europe’s No. 2 auto market after Germany. Carlsberg A/S, the Danish owner of Russia’s biggest brewer, missed estimates for fourth-quarter earnings after the government increased taxes and regulation on the industry, including a ban on beer sales at kiosks from Jan. 1.

Gross domestic product grew 3.4 percent last year, the weakest since a contraction in 2009. The pace probably slowed to 2.4 percent in the fourth quarter of 2012 from a year earlier, according to a Bloomberg survey.

That’s less than half the 5 percent pace Prime Minister Dmitry Medvedev has said Russia will need to grow. The government has called on Bank Rossii to lower borrowing costs as investment falters, while monetary-policy makers including central bank First Deputy Chairman Alexey Ulyukayev have argued that economic output is already near full potential.

Russia’s central bank may reduce interest rates once inflation slows, though Chairman Sergey Ignatiev told reporters last week he wouldn’t promise it.

Higher Investment

Industrial output unexpectedly shrank in January for the first time since 2009. The data on investment, retail sales and wages will be “crucial” in determining whether the industrial production figures were an anomaly, Jacob Nell, chief economist for Russia at Morgan Stanley in Moscow, said by e-mail.

“Following Ignatiev’s words, rates can only come down when inflation comes down, and inflation in February looks likely to be higher than a year ago,” he said, adding that he predicts no rate change in March “unless there is a meltdown in growth.”

Fixed-capital investment advanced 1.1 percent from a year earlier, the statistics service said. The median estimate of 19 analysts in a Bloomberg survey was for a gain of 0.5 percent.

Volatile Indicator

The indicator is volatile in Russia because of swings in spending by large state-run companies and the government, Vladimir Tikhomirov, chief economist at Moscow-based Otkritie Financial Corp., said by phone before today’s release.

“Given the investment growth of about 15 percent early last year, there’s no reason to expect a big number in annual terms now,” he said.

President Vladimir Putin, who returned to the Kremlin for a third term last year, told the government to boost investment to 25 percent of GDP by 2015. The figure was 18 percent last year, Finance Minister Anton Siluanov said in an interview last week.

Real wages grew faster than forecast, advancing 8 percent compared with a year earlier. Economists polled by Bloomberg projected a 3.3 percent gain. Real disposable incomes advanced 0.7 percent, missing the median estimate of 4.8 percent.

(Updates with analyst comment in fourth paragraph, markets in fifth.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE