According to preliminary estimates by Rosstat, GDP growth almost doubled to +1.7% y/y in Q3 from +0.9% in Q2, slightly beating expectations. Key growth drivers in Q3 were wholesale trade turnover (+3.8%), in particular gas trade, and a turnaround in agricultural production (+5.1%). Both mining and industrial production also grew by a solid +2.9% y/y in Q3, though for the latter this was unchanged from Q2. Demand-side details are not available as yet, but there are signs of improved private sector conditions. Declining inflation, lower interest rates (four policy rate cuts since June 2019), a tightening labor market and improving consumer sentiment are likely to have boosted consumer spending, even though retail sales growth declined to just +0.9% y/y in Q3 (from +1.6% in Q2). But a steadily improving services PMI (from 49.7 points in June to 53.6 in September and 55.8 in October) indicates that the services sector has been strengthening. Russia’s economy ministry expects growth of +1.7% y/y in Q4 as well. We think this is a bit over-optimistic, not least because there will be a significant base effect (Q4 2018 growth was +2.7% y/y, after +1.5% in Q3). We forecast full-year 2019 growth to come in at around +1%.
