Putin looks for positives as Russia’s consumer demand, industrial output slide

12:30 pm Wednesday, March 29th, 2023

By Alexander Marrow

MOSCOW (Reuters) – Russian President Vladimir Putin on Wednesday pointed to record low unemployment and marginally higher real wages as evidence of a gradual economic recovery, although data showed that consumer demand and industrial output dropped in February.

Russia’s export-dependent economy proved unexpectedly resilient in the face of tough Western sanctions last year, but a return to pre-conflict levels of prosperity may be far off as more government spending is directed towards the military.

Data from the Rosstat federal statistics service showed that unemployment dropped to 3.5% in February, a record low, while real wages, which are adjusted for inflation, rose 0.6% in January.

Retail sales, a key gauge of consumer demand, fell 7.8% year-on-year in February, while industrial output dropped 1.7%.

“Unemployment in Russia remains at a record low level, however this does not mean that all problems on the labour market are already resolved,” Putin told a government meeting, mentioning issues around the quality of some jobs and specific regions where unemployment is above average.

Russia’s low unemployment is evidence of a labour shortage which has become more pronounced since Putin ordered a partial mobilisation of troops in September that saw hundreds of thousands of mostly young, working-age men called up to the army while others fled the country to avoid being drafted.

The central bank has developed a more hawkish stance this year, warning that Russia’s widening budget deficit and the labour shortages pose ongoing inflationary risks.

Putin and other Russian officials have used small rises or only limited falls in economic indicators to extol Russia’s resilience in the face of Western sanctions, proudly pointing to a GDP contraction of just 2.1% in 2022 as evidence of this.

But that decline, combined with double-digit inflation meant that real disposable incomes fell 1% in 2022, according to Rosstat, with real wages only now starting to pick up again.

“The population’s wages and real disposable incomes have again started growing in real terms in the country as a whole,” Putin said. “Yes, for now these are very modest figures, but they are there.”

(Reporting by Alexander Marrow and Darya Korsunskaya; Editing by Mark Trevelyan)