Russian retail sales beat forecast but other indicators worrisome

Retail sales in Russia rose more than expected in August, suggesting a tepid economic recovery is underway, but real wage growth was slightly lower than forecast and agricultural output tumbled, data showed on Wednesday.

Russia’s economy is recovering from a recession in 2014-2016, thanks to higher prices for oil and rising retail sales, the barometer of consumer demand.

Retail sales grew 2.8 percent in year-on-year terms in August, data from the Federal Statistics Service showed, above a 2.2 percent rise predicted in a Reuters monthly economic poll.

Other indicators, however, were lacklustre, suggesting the Russian economy is now taking a hit from a rapid rouble drop amid threats of more U.S. sanctions.

Housing construction declined in annual terms for the fourth month running, contracting 17 percent in August compared with a year ago, while output in the agriculture sector dropped 10.8 percent.

Real wages, which are adjusted for inflation, rose 7.0 percent year-on-year in August, below a 7.5 percent growth forecast by the Reuters poll.

Data on incomes and a “catastrophic drop” in housing construction and the agricultural sector suggest gross domestic product may have grown by less than 1 percent year-on-year in August, said Kirill Tremasov, former head of the economy ministry’s macroeconomic forecasting department and now research chief at Loko-Invest.

But the recent batch of data may not be enough for economists to revise their forecasts. The central bank, which raised interest rates for the first time since late 2014 last week, said it is sticking to its 1.5-2.0 percent GDP growth projection for this year.

“The experience from the past decade is that these slumps in agriculture tend to pass within a few months,” Capital Economics research firm said in a note. “And given that other sectors, including industry and retail, are holding up well, growth is likely to pick up again in Q4.”