Q3 15 likely to be the bottom of Russia's economic contraction

Russia's September output and demand data signalled that economic contraction reached the bottom in Q3 15 as we previously expected. 

However, as construction growth stays in negative territory, production sectors linked to industrial construction are losing the most. Metal and metal parts production was down 3.7% y/y in September and construction materials are following the same trend.

Food inflation has eased due to seasonal reasons and the trend is likely to continue further due to the base effect and realised transition of the devaluation into prices. On the other hand, the government has stopped wage increases in the public sector. 

"These macro forecasts for Russia are dependant on more Q3 15 data flow. Currently the economy is likely to shrink 6.2% y/y in 2015 and expand 0.5% in 2016. Upside risks to the current forecasts include additional monetary easing and higher-thanexpected oil price", says Danske Bank.