January data a ‘pleasant surprise’, Russian seasonally adjusted GDP up 0.6% – VEB

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MOSCOW. Jan 28 (Interfax) – January was an unexpectedly successful month for the Russian economy, which slackened at the end of 2017, and the year got off to a “very good start” even despite the compensatory nature of the uptick and non-representative character of January as a month with fewer working days, Vnesheconombank (VEB) said in a report.

According to VEB, GDP growth in January 2018 was 1.9% against 1.1% in December 2017 and 1.2% in Q4 2017. Furthermore, seasonally adjusted month-on-month growth was 0.6%, compared with reductions in Q3 and Q4 of 0.1% and 0.3%, respectively, which had prompted discussions of a renewed recession in the Russian economy.

Positive trends in seasonally adjusted GDP were helped by mineral extraction, up 1.7%, manufacturing sectors, up 3.1%, electricity and water supply, up 1.1%, retail sales, up 1.1%, transport, up 0.5%, and paid services, up 1.1%, said VEB. Downward trends were seen for agricultural production, down 1.1%, construction, down 2%, and net taxes on products and imports, down 0.3%.

“The January data served up a pleasant surprise. Most published results showed unexpected high growth. By our estimates, GDP grew 0.6% compared to December, partially offsetting the decline of previous months. Industry has at last picked up, jumping 2.4% compared to December. Mineral extraction rose thanks to higher extraction of gas and liquefied gas production. Manufacturing output rose across the board, but the most striking results were posted by sectors like metallurgy and machine building, where output fell significantly in the second half of last year,” said Andrei Klepach, a former deputy economic development minister who is chief economist at VEB. Against the generally favorable backdrop, investment activity declined in January and construction fell for the second straight month. Equipment imports also declined, Klepach said.

“January is not a representative month as there are on average 20% less working days than in other months. Also, the surge in economic activity was largely compensatory in nature following the decline of previous months. Even so, January was a very good start to the New Year,” Klepach said, adding that he hoped growth would persist in the coming months.

The Russian Economic Development Ministry has estimated the economy grew 2% year-on-year in January.