Russian Investment Unexpectedly Fell First Time in 18 Months

Russian investment unexpectedly slid last month for the first time since March 2011 as uncertainty over the economy prompted businesses to reduce spending.

Fixed-capital investment fell 1.3 percent in September compared with a year earlier, the Federal Statistics Service in Moscow said in an e-mailed statement today. Economists predicted an increase of 2.1 percent, according to the median of 15 forecasts in a Bloomberg survey.
A slowdown in China, Russia’s largest trading parter, and Europe’s sovereign debt crisis are discouraging capital spending, with companies including OAO Novolipetsk Steel (NLMK) and OAO GMK Norilsk Nickel (MNOD) announcing plans in the past month to scale back investment. President Vladimir Putin ordered the government in May to boost investment to 25 percent of gross domestic product by 2015 from 21 percent last year.

“We’re seeing a slowdown in investment from natural- resources companies, which is not so much because of the investment climate as concerns about demand domestically and from abroad,” Vladimir Tikhomirov, chief economist at Otkritie Capital in Moscow, said by telephone. Weaker construction spending and state investment also played a role, he said.

The Micex Index (INDEXCF) of 30 stocks maintained gains after the announcement and was 1.4 percent higher at 1,475.83 as of 4:48 p.m. in Moscow. A close at that level would be the highest since Oct. 5.
Target Breached

Consumer prices advanced 6.6 percent in September, rising above the central bank’s target range of 5 percent to 6 percent for the first time this year. Bank Rossii cited lending and low unemployment as supporting domestic demand last month when it unexpectedly raised interest rates to bring inflation back in check.

Retail sales advanced 4.4 percent in September from a year earlier, while dropping 0.4 percent compared with August, the statistics service said. Economists predicted an annual increase of 4.2 percent and a drop from the previous month of 0.6 percent, according to two Bloomberg surveys.

“In September there was a very quick acceleration in inflation, which usually gets people wanting to spend more,” Natalia Orlova, chief economist at Alfa Bank in Moscow, said in a telephone interview. “But there’s so much uncertainty now that the consumer momentum isn’t taking off as fast.”
Wages, Incomes

Real wages grew 6.6 percent from a year ago, less than the 7.3 percent median estimate of 14 economists. Disposable incomes also advanced less than projected, rising 3.8 percent instead of a forecast 5.4 percent.

Unemployment held at 5.2 percent for a second month, matching the lowest level on record, the service said. The median estimate of 13 economists in Bloomberg’s survey was for a rise to 5.3 percent.

Although growth is slowing in the second half, the September data aren’t “sufficiently gloomy to raise concerns of the government and the central bank,” Julia Tsepliaeva, head of research at BNP Paribas SA in Moscow, said in a note to clients. Bank Rossii will remain focused on inflation, she said.

The central bank will “likely” increase interest rates in the first half of November if consumer-price growth continues to accelerate, Tsepliaeva said.