Barclays Believes Russia’s Recession Is Ending

Originally appeared at Forbes

A new dawn for Moscow…again? Barclays thinks the recession pains are starting to ease up a bit. But, the investment bank warns, Russia’s economy is still struggling and won’t post any growth this year and maybe not until the end of next year.

Has Russia bottomed out?

If I told you what I knew, that would cost an annual fee of $20,000.

In the meantime, here is what Barclays Capital is thinking.

Russia’s real sector data for August was a bit better, implying positive momentum change in a country hit by sanctions and weak oil prices. It’s not that data is improving, per se. It’s just that the rate of decline is moderating.

In particular, real investment improved to a -6.8% yearly rate from the -8.5% yearly rate in July, which proved to be better than consensus. Investments are starting to benefit from the improvement in locally produced profits that has taken place in 2015. In addition, industrial production declined by -4.3% yearly in August from the -4.7% decline in July.

When it’s that bad, one hopes it can only go up.

Barclays might be a bit more bullish than they need to be. Consumption data released on Thursday was worse than expected. Real wages are down 9.8% compared to a 9.2% decline in July. This was worse than expectations in the market.

Retail sales are declining again, down 9.1% in August and only slightly better than the July decline. And unemployment was unchanged, meaning further adjustment in consumption could be under way this quarter.

For BarCap, today’s Russian data suggest that declines in real GDP continued into the third quarter, but that momentum is improving, albeit slowly.

For instance, second quarter GDP fell 2.0% on a quarterly basis, accelerating from the first quarter decline of 1.6%. Barclays is forecasting a decline in third quarter GDP to be better than previous quarters. In other words, the recession is still in place, “but is starting to show signs of bottoming out,” BarCap analysts said today.

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