(Bloomberg) — Russia’s economy shrank for a second quarter as the shock of sanctions over the Kremlin’s invasion of Ukraine disrupted trade and upended domestic demand, with the worst of the downturn likely early next year.
Gross domestic product fell an annual 4% in the third quarter, in line with the central bank’s estimate but faring better than every forecast in a Bloomberg survey of analysts. It follows a drop of 4% in the prior three months, in what was Russia’s first GDP contraction in over a year.
In a statement on Wednesday, the statistics service, also known as Rosstat, cited a steep decline in wholesale and retail trade alongside a drop in industries including manufacturing.
A boost in government spending and Russia’s ability to divert exports to friendly nations have helped offset the damage wrought by sanctions, with construction among the few sectors to expand last quarter thanks in part to a state program of subsidized mortgages.
Expectations for the economy have shifted from a near-collapse soon after the invasion of Ukraine to a shallower recession that will extend well beyond 2022. Ahead is a contraction that may represent Russia deepest slump since the global financial crisis more than a decade ago.
Another Bloomberg poll has predicted a steeper GDP decline this quarter before the recession culminates with a decline of over 8% in the first three months of 2023. Just two months ago, the low point was expected already this year.
“We see a persisting supply-side shock and a forced structural transformation to a lower-tech economy resulting in a prolonged recession and lower potential growth,” Morgan Stanley economists including Alina Slyusarchuk said in a report this week.
The economy may not eke out growth until the third quarter of 2023, the survey shows.
Bloomberg Economics predicts GDP will shrink 3.5% in 2022 and 2% in 2023, with the government possibly dialing back on some of the support measures it used to shore up demand and construction.
What Bloomberg Economics Says…
“The Russian economy will continue to shrink over the next six months for two reasons. First, the energy commodity sector and manufacturing will continue to shrink as sanctions bite. Second, some of the key tools Russia used to boost domestic demand throughout this year, such as indiscriminate mortgage subsidies, are now exhausted.”
—Alexander Isakov, Russia economist.
Looming restrictions on oil shipments will test Russia’s resilience, with exports of gas to Europe already plunging amid supply disruptions, and consumer demand under increasing pressure from President Vladimir Putin’s call-up of reservists to fight in Ukraine.
Russia’s oil and gas production started declining in September, creating a drag on industrial output and leading to a worse contraction than expected. Prospects are turning even more grim, with state gas producer Gazprom PJSC reporting its daily exports are now extending the multi-year lows hit last month.
Speaking to lawmakers on Tuesday, Bank of Russia Governor Elvira Nabiullina warned the state in the economy could worsen.
“We really need to look at the situation very soberly and with our eyes open,” she said. “Things may get worse, we understand that.”
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
