Russia: Surprised revision shows deeper economic contraction in Q1
June 15, 2015
A more recent estimate published by the Federal State Statistics Service (Rosstat)—revisions to flash GDP estimates are rare in Russia—showed that GDP decreased 2.2% in Q1 over the same quarter last year. The reading was revised down from the 1.9% contraction estimated previously and came in below the timid 0.4% expansion registered in Q4 2014.
A detailed breakdown of data by production showed that the manufacturing sector deteriorated and contracted 0.6% annually in Q1, which contrasted the 0.6% expansion in Q4. Signs that private consumption is rapidly weakening reflected the fact that the wholesale and retail sector plunged in the first quarter (Q4: +1.7% year-on-year; Q1: -7.6% yoy). Moreover, the financial sector began to struggle since international sanctions were imposed on Russia last year and took a hit in the first quarter from weak domestic demand and tighter monetary conditions. The financial sector contracted 3.9% annually in Q1, which was below the 6.5% rise observed in Q4. In addition, the contraction in the construction sector deteriorated in Q1. It fell 4.1% in the first three quarters, which followed a 3.6% drop in Q4.
A quarter-on-quarter comparison confirmed the deterioration suggested by the annual data. GDP contracted a seasonally-adjusted 1.3% in Q1, which came in below the 0.6% drop tallied in Q4 201. The quarterly contraction was the steepest since Q2 2009.
Author: Ricardo Aceves, Senior Economist