Russian economic rebound enters soft patch

Rising unemployment and weak business activity means Russia's economic recovery is running out of steam, with forecasts being pared back as economists wait for signs of traction.

The official measure of unemployment jumped to 9.2% in January, its highest level in a year. It's evidence that Russia's economy, which was being rescued by higher oil prices, is still weak in many areas.

Retail – with people tending to save rather than spend.

Banking – with consumer lending falling in January for the 12th month in a row.

And Manufacturing – which expanded in February but at a slower than the month before.

After shrinking 8.7% in 2009, Ksenia Yudaeva, Head of Macroeconomic Research at Sberbank still thinks the economy will grow this year.

“Our forecast that GDP will grow 3.8%. Normally the lending situation is a lagging variable toward GDP growth and industrial production growth. So we expect that credit will start growing in the second half of the year.”

There are a range of forecasts for Russian GDP growth this year, but even the more optimistic are being pared back in the wake of the latest data. Renaissance Capital cut its forecast for GDP to 7.9%, with Chief Economist Aleksey Moiseev concerned about recent retail services data.

“A couple of indicators have been quite worrying suggesting that economic momentum has indeed been slowing down. And of those I need to particularly point out retail services to the population.”

Externally, much still depends on China, the fastest growing economy – and the key customer for all commodity exporting countries.