Economic activity remains moderate in February, and the trend to persist in 2025

RUSSIA ECONOMICS - In Brief 03 Apr 2025 by Evgeny Gavrilenkov

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Rosstat reported that the output of the five basic sectors (a monthly proxy for aggregate economic activity accounting for industry, agriculture, construction, transportation, and trade) grew by 1.7% y-o-y in 2M25 and 0.3% y-o-y in February alone. The y-o-y numbers look unimpressive (especially in February) due to a base effect that stems from fewer working (and calendar) days this year, as 2024 was a leap year. This effect could trim about 3.4% of economic activity in y-o-y terms. Therefore, slower growth in February doesn’t look too alarming. However, the overall growth deceleration becomes more evident – especially in some segments. Moreover, in the next months, this deceleration (and even contraction) will likely deepen further in segments such as mining. We mentioned previously that the mining segment was down y-o-y by 4.9% in February and 3.5% in 2M25. External pressure on the Russian oil and gas industry will persist in the foreseeable future. Manufacturing keeps growing this year but at a slower pace than in 2024.Retail sales grew y-o-y by 2.2% and 3.8% in February and 2M24 and posted a visible deceleration compared to last year’s 7.2% growth. Cumulative growth numbers can improve in the next few months as the importance of the February 2025 fewer calendar days effect diminishes. However, from a more fundamental point of view, consumer demand will weaken this year as lending to households contracted for a fourth month in a row (the latest data are available for February). It seems unlikely to see it bouncing back strongly in the near future. Wholesale trade sank y-o-y by 5.9% in February and 2.0% in 2M25. Construction, in contrast, soared y-o-y by 11.9% and 9.8...