Russian GDP may have grown slightly in Q2 - Central Bank analysts

MOSCOW. July 15 (Interfax) - The Russian economy may have grown slightly in Q2 compared to Q1 2025, partly due to higher manufacturing output, the Central Bank of Russia's Research and Forecasting Department said in its latest Talking Trends bulletin.

"In Q1 2025, economic activity dropped from its peak in Q4 2024, with April-May indicators signaling a resumption in GDP growth in the second quarter. This is confirmed by data on production and consumer activity, lending, the labor market, and corporate defaults. June's surveys point to moderate demand," the bulletin says.

"Flash data for June signal more moderate dynamics compared to April and May," it says.

The Central Bank said the economy became "less overheated in Q1." "Household consumption slowed significantly as the effects of monetary tightening cy at the end of last year manifested themselves. Capital expenditure growth was also high, but concentrated in a narrow range of sectors," the report says.

"Flash data suggest that the economy may have grown slightly in Q2 compared to Q1. The expansion of industrial output (+1.0% seasonally adjusted in April-May compared to Q1) was mainly driven by accelerated growth in the manufacturing industry with moderate growth in mineral extraction as voluntary restrictions by OPEC+ countries eased gradually. Investment industries focused on government demand and import substitution continued to outperform in manufacturing," the analysts said.

"Judging by the flash data, household spending growth continued to slow in the second quarter. June surveys of businesses showed demand was met to a lesser extent and production plans were scaled down. Thus, private internal demand has aligned more with a balanced growth trajectory. These dynamics are reflected in slower growth for costs and factory-gate prices," they said.

"But the balance of labor market risks is still tilted towards pro-inflationary," the analysts said, recalling that in May unemployment fell to a new all-time low of 2.2%, while employment again peaked. "Real wage growth (+0.5% MoM SA in April) and the propensity to make large purchases remain high. Some surveys and flash data, indicating a drop in recruitment and shift in the balance of expectations towards staff reductions, suggest the situation is stabilizing gradually," the Central Bank said.