Russian May Consumer Demand Probably Weakened as Economy Worsens

Russian consumer spending probably eased and investment shrank at the fastest pace since 2011, adding to evidence the $2 trillion economy is stalling.

Retail sales rose 3.6 percent from a year earlier in May after a 4.1 percent increase in April, according to the median estimate of 18 economists in a Bloomberg survey. Fixed-capital investment probably fell 1.2 percent, shrinking for a third month, a second poll showed. The Federal Statistics Service is scheduled to publish the data by June 24.

The outlook underscores the risk that the world’s biggest energy exporter will struggle to overcome its steepest slowdown since a contraction ended in 2009. Unemployment near a record low has helped underpin household finances and confidence, making Russia more dependent on domestic demand as a European recession sapped demand for its exports of oil and gas.

“Corporate incomes are decreasing in real terms, cutting funds that companies have for investment,” Alexander Morozov, chief economist for Russia at HSBC Holdings Plc in Moscow, said by phone yesterday.

The Micex Index fell for the first time in four days yesterday, losing 0.9 percent to 1,323.57. Russia’s stocks have the cheapest valuations among 21 emerging markets tracked by Bloomberg. The ruble weakened for a fourth month against the dollar in May, the longest stretch of monthly declines in three years, according to data compiled by Bloomberg.

Stimulus Debate

The government has remained split over policies to right the course of the economy, with the International Monetary Fund warning June 18 against the danger of stoking inflation with fiscal stimulus. Finance Minister Anton Siluanov said last week that a weaker ruble may be used to revive growth.

Gross domestic product grew 1.6 percent in the first quarter from a year earlier, missing the 5 percent medium-target growth set by Prime Minister Dmitry Medvedev. The IMF cut its economic growth forecast for Russia, predicting GDP will expand 2.5 percent this year and 3.25 percent in 2014. The Economy Ministry projects 2.4 percent growth this year and 3.7 percent in 2014.

Policy makers kept their main rates unchanged June 10 for a ninth month as consumer-price growth accelerated to 7.4 percent in May, more than a percentage point above the central bank’s target range of 5 percent to 6 percent for this year.

May numbers were also affected by the month having fewer working days in May compared with a year ago said Vladimir Osakovskiy, chief economist for Russia at Bank of America Corp. in Moscow and the most accurate forecaster of Russian retail sales and investment.

Unemployment fell to 5.4 percent in May from 5.6 percent in April, according to the median estimate of 18 economists in a Bloomberg survey. Real wages grew 3.9 percent from a year earlier from 4.2 percent the previous month, another survey showed.

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