Russia’s economic slide continued in June but didn’t take a turn for the worse, as fresh data underscored the uncertainty about the longer-term impact of sanctions.

Industrial production was down 1.8% in June from a year earlier, less of a drop than analysts had expected, the State Statistics Service said Wednesday. Retail sales shrank an annual 9.6%, the smallest decline since March, the month after Russia’s invasion of Ukraine triggered unprecedented US and European economic restrictions.

But cargo shipments, a key indicator of economic activity, saw a bigger-than-forecast decline in June, falling 5.8% from a year earlier, more than double the drop seen the previous month. Wholesale trade was also off over 18%, while construction, long a driver of growth, was flat.

The mixed picture highlights the difficulty of forecasting as the impacts of the sweeping restrictions on imports and technology ripple across the economy. Amid surging prices for energy and other commodity exports, economists have cut their outlooks for the contraction this year, but warned the recession could last longer into 2023.

The International Monetary Fund this week improved its forecast for this year to a 6% contraction, from the previous outlook of an 8% decline, saying crude oil and non-energy exports were “holding up better than expected” and domestic consumption was “resilient” despite sanctions.

What Bloomberg Economics Says:

“The strong ruble provides a boost to consumer confidence, which, according to the surveys, is topping post-COVID highs. Otherwise, continuing exit of foreign competitors prompts expectations of higher market power and thus profits among local corporates. We expect that the Russian economy will prove more resilient in a short-term, declining just 3.5% in 2022.”

--Alex Isakov, Russia economist. Read his Russia Insight. 

Surveys show business and consumer confidence has picked up in recent months, buoyed by a rebound in the ruble and sharp cuts in interest rates made by the Bank of Russia. Last week, the central bank brought its key rate below the pre-invasion level.

“We are observing some stabilization because of the ruble’s strength, price declines, the rate cuts and the stability of the labor market,” said Dmitry Polevoy, economist at Locko-Invest. “But for a sustainable recovery, incomes and lending need to grow and here we see only first signs of some weak revival.”