MOSCOW: A tentative improvement by Russia's economy suffered a setback in May, macroeconomic data published on Monday indicated, underscoring the challenges in reviving economic growth after its recent slump.
Russia's economy contracted by 3.7 percent last year, hit by low international oil prices and Western sanctions imposed because of the Ukraine conflict. Recent data had suggested the economy had bottomed out and was poised for recovery.
However, figures showed that May's retail sales - a proxy for household consumption, the largest component of domestic demand - fell by 6.1 percent year-on-year, worse than April's 4.9 percent decline. Analysts polled by Reuters had forecast a 4.7 percent drop.
Retail sales did rise 0.8 percent month-on-month in May, compared with a 1 percent contraction in April, and other data published on Monday was better than expected. Real wages fell by 1 percent in May compared with a fall of 1.7 percent in April. Unemployment declined to 5.6 percent, below the 5.8 percent predicted by analysts. But on balance the data was disappointing, Capital Economics economist Liza Ermolenko said, showing the continued pressure on consumers from falling real wages. "All this serves as a reminder that conditions in the Russian economy remain difficult," Ermolenko said in a note.
"And although a recovery should take hold over the second half of the year, it will be extremely weak." Based on recent data, she said, gross domestic product probably fell around 2 percent in the second quarter, a deterioration compared with a 1.2 percent contraction in the first quarter.
Economists polled by Reuters at the end of last month significantly upgraded their 2016 growth forecasts for Russia, but the economy is still expected to shrink 0.6 percent this year.
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