Russian Investment Shrinks After Ukrainian Tensions

Russian investment fell more than analysts forecast last month and retail-sales growth held near the slowest since 2010, as the crisis in Ukraine batters the $2 trillion economy.

Fixed-capital investment fell 2.7 percent from a year earlier, the slowest in four months, after a 2 percent drop in July, the Federal Statistics Service in Moscow said today in a statement. The median estimate of 14 economists in a Bloomberg survey was for a 2 percent decrease. Retail sales expanded 1.4 percent after an upwardly revised 1.2 percent gain in July.

“Interest rates grew, inflation accelerated and on top of that there are high geopolitical risks,” Olga Sterina, an analyst at UralSib Capital in Moscow, said by phone before the data release. “All of that negatively affects the investment climate and businesses’ desire to invest.”

The report casts further doubt on Russia’s ability to weather sanctions imposed by the U.S. and the European Union over the crisis in Ukraine. Consumption, once a pillar of the economic recovery, is slipping while data two days ago showed that industrial production failed to grow in August for the first time in seven months.

The economic restrictions, which target individuals and companies, fanned price growth and helped spark capital flight, sending the ruble to a record low. In retaliation, President Vladimir Putin banned some food imports from the U.S. and its allies.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza