Preliminary results of the economic development in Q1 2015

The economic situation in January–March 2015 was governed by simultaneous contraction in investment and consumer demand.

Fixed investment in Q1 2015 stood at 94% and the scope of works in construction was 95.3% of the respective value last year. The hardship in the construction and investment sector is determined by the fact that the scale of business has been contracting for the third consecutive year.

The weakening of consumer demand dynamics, which took place throughout the entire 2014, has been characterized since January 2015 in its annual variation by drastic contraction of retail trade turnover and retail paid services. In March, the turnover of retail trade and retail paid services stood at 91.3% and 98.0%, respectively, compared to that last year. It is worthwhile noting that in March 2015 the food and non-food markets' turnover на 7.5% and non-food market– на 9.9% compared to that in March 2014. The rate of inflation and the dynamics of personal income have a strong effect on the dynamics of demand for food products, while the non-food market is still being under the impact of the resources which individuals accumulated during the feverish demand in the period between November and December of 2014.

In March, real personal income and real wages stood at 98.2% and 90.7%, respectively, compared to March 2014. The food price index in March 2015 stood at 111.8% against last December, with 103.7% year earlier, while the non-food price index was 106.8% against 101.4%.

The internal demand contraction determined the dynamics of industrial output and market infrastructure. Industrial output decreased 0.6% in March 2014 and 0.4% in Q1 2015 compared to the same period last year. The structural peculiarities of industry in 2015 are determined by the continuing positive dynamics of mineral extraction and further decline in the manufacturing sector. In the period between January and March of 2015, the mineral extraction volume increased 0.7% and 0.4% in March, compared to the same period last year.

The manufacturing output declined 1.9% year-over-year in March 2015. The positive dynamics in March 2015 on a annualized basis were seen only in the three sectors, namely the food production industry (102.3%), manufacture of coke and oil products (100.9%) and chemical industry (111.4%).

The industry-specific decline in the engineering sector varied in March within a range of 4.3% and 6.1%. It is worthwhile noting that the dynamics of manufacture of means of transport and equipment in Q1 2015 were adversely affected by the decline in the car industry output, down 10.6% compared with the same period last year. Furthermore, in 2014, the manufacture of ships, aircrafts and spaceships saw stable, positive dynamics, whereas at the end of January–March 2015 there was a 10.6% decline compared to the corresponding period last year.

The increase in general unemployment in Q1 2015 is alarming, up 2.6% compared with the same period last year. This is most worrisome given the decline in personal income dynamics.

Olga Izryadnova, Head of Structural Policy Department.