Russian Wages Drop as Ruble Slide Undercuts Demand

Russian wages contracted for a second month in September as the sliding ruble and accelerating inflation undercut consumers’ spending power.

Wages adjusted for inflation fell 1 percent in September after August was revised to a decline of 1.2 percent, the biggest drop since October 2009, from a 1.4 percent increase, the Federal Statistics Service in Moscow said yesterday in a statement. The median estimate of 17 economists in a Bloomberg survey was for a 1.2 percent increase. Retail sales rose 1.7 percent from September 2013 after rising 1.4 percent in August, compared with a 1.4 percent median estimate of economists.

“Data on real wages is really bad,” Olga Sterina, an analyst at UralSib Capital in Moscow, said in an e-mailed note. “The slowdown in retail credit growth and the stagnation of real incomes have led to weaker consumer activity.”

Consumption, once the main growth driver, is struggling to ignite the sputtering $2 trillion economy weakened by sanctions imposed by the U.S. and its allies over the crisis in Ukraine. The economy is estimated to grow 0.3 percent in 2014, according to a Bloomberg survey of economists, undercut by sliding oil prices, the depreciating currency and intensified capital flight.

The ruble lost more than 14 percent in the third quarter, the worst performance among more than 170 world currencies tracked by Bloomberg. It strengthened 0.4 percent to 40.6943 against the dollar at 8:18 p.m. in Moscow yesterday.

Real disposable income advanced 0.6 percent in September after a downward revised 3.4 percent gain in the previous month. It missed the median estimate of 2.7 percent.

Putin’s Ban

President Vladimir Putin’s ban in August on certain food imports, in retaliation for restrictions on Russian businessmen and companies imposed by the U.S. and European Union, spurred further price increases in the country.

Inflation quickened to 8.2 percent in mid-October after reaching 8 percent at the end of September, according to Dmitry Dolgov, an analyst at Alfa Bank.

“The central bank has a full range of arguments to raise the rate in the nearest future,” he said in a note.

The bank has moved three times this year to raise the key interest rate to 8 percent from 5.5 percent in February. The regulator has resumed interventions in October, spending about $13 billion to limit the currency slide. The next rate meeting is scheduled for Oct. 31.

‘Negative Zone’

Fixed-capital investment fell 2.8 percent from a year earlier after a 2.7 percent drop in August, the statistics service said. The median estimate of 19 economists in a Bloomberg survey was for a 3 percent decrease.

“High interest rates and an uncertain outlook on the economy will likely prevent investment from exiting the negative zone,” analysts at Sberbank Investment Research wrote in a note before the data release.

Russia’s unemployment rate ticked higher to 4.9 percent after a 4.8 percent rate in August, the statistics service reported.

“The sharp drop in oil prices, ruble weakness, Western sanctions and the central bank’s monetary tightening will push Russia’s economy into mid-term stagnation,” Sterina said.

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