Russia: Unemployment declines but the economic situation looks mixed

Yann Quelenn Swissquote Bank Ltd

Since the 2008 crisis, unemployment rate is declining and the data that will be released today will approach 5%. The metric is expected to print lower at 5.1% versus 5.2% a month earlier.

The jobless rate is then declining but the proportion of unemployed person having higher education is growing. Yet, the ruble collapse in 2014 has created strong difficulties for companies to hire those skilled workers. On top of that it is clear that there are now more people with higher education than 10 years ago. As a result the proportion is naturally growing.

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Meanwhile, real disposable income is falling for the 4th consecutive month (-0.4% in June). On the other hand, retail sales have grown 1.1% y/y in June after the positive increase of 0.1% y/y in May. However, that was at least three years that the annualized retail sales growth was negative. Inflation have increased by 4.4% y/y in June. It is the highest rate since February.

The Russia key rate has been lowered at 9%. The differential with inflation is still important and we should see the CBR tightening its monetary policy at a slow pace as growth remains weak. The last GDP data, the Q1 has shown a positive print, even though weak, at 0.5%.

We then believe that the ruble is set to appreciate but the appreciation should remain limited due to the CBR intervention. We target 56 before year-end.

Author

Yann Quelenn

Swissquote Bank Ltd

Yann Quelenn is a Market Analyst at Swissquote Bank with strong technical and financial background. Previously, he worked as FX Trader at Banque Privée Edmond de Rothschild and as Portfolio Manager at Polaris Investment in Luxembourg.

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