UPDATE 2-Russian consumer still strong in November

Wed Dec 19, 2012 10:57am EST

Related Topics

* Retail sales pick up more than forecast

* Capital investment falls short

* Nominal, real wage growth strong

* Jobless rate inches up

* Cbank seen on hold till Q2 2013

By Maya Dyakina

MOSCOW, Dec 19 (Reuters) - Russia's economic picture brightened slightly in November, with consumer data coming in stronger than expected even as capital investment weakened.

The data cemented expectations the central bank will keep rates on holding until spring.

Retail sales growth picked up more than forecast to 4.4 percent year-on-year, while capital investments fell short, rising only 1.2 percent, the Federal Statistics Service said in its monthly report on Wednesday.

"While consumption indicators have shown some resilience in November, investment indicators continue to point to a broadly weaker underlying state of the economy," Ivan Tchakarov, chief economist for Russia and CIS at Renaissance Capital said in a note.

Stronger consumer figures chime in with industrial output data showing a pick-up in manufacturing in November. However, extractive industries almost flatlined, reflecting weak demand for Russia's resource exports.

Russia's $1.9 trillion economy still relies heavily on energy and raw materials exports and any fall in the oil price will have a big impact on its overall economic performance unless it diversifies.

The unemployment rate inched up to 5.4 percent, or 4.1 million people, in November from 5.3 in October. Nominal wages continued their rapid growth, up 14.2 percent, while real pay grew by 7.3 percent

Strong consumption and a tight labour market have been the major drivers of economic growth this year, boosted by credit expansion and government spending during the election period.

However, Russia saw a lacklustre second half of the year after Vladimir Putin's return as president, while a spike in inflation has cut into the rate at which the spending power of households is growing.

Inflation has broken out of the central bank target range for this year of 5-6 percent after a summer drought decimated this year's harvest and is expected to reach 6.5-6.7 by the end of December.

The central bank central bank expects inflation to slow to within its 2013 target range of 5 to 6 percent in the middle of the year, Chairman Sergei Ignatyev said.

The regulator tweaked its policy rates in December, in a move designed to reduce market volatility, and signalled that it intends to keep rates on hold in the near future in a neutral tone, devoting similar weight to risks of higher inflation and slower economic growth.

Economic growth is expected to continue its slowdown till the second quarter of next year due to weaker exports and less generous budget expenditures.

"We think the central bank will remain on hold till March or April and then will start to loosen its monetary policy," said Maxim Oreshkin, economist at VTB Capital.

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