Russian retail slump clouds forecasts for economic recovery By Reuters

Fed hikes by 0.25% in further downshift on tightening, but sees more hikes ahead

Russian retail slump clouds forecasts for economic recovery

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MOSCOW (Reuters) - Russian retail sales fell more than expected in December, official data showed on Wednesday, challenging the government's optimistic predictions for an imminent economic recovery.

Retail sales are the largest contributor to Russian gross domestic product and have suffered steep falls since the economy entered a deep slump in 2014, when oil prices collapsed and the West imposed sanctions over the Ukraine crisis.

They contracted 5.9 percent in December, data from the Federal Statistics Service showed, more than the 3.3 percent drop predicted by a Reuters poll of analysts and the 4.1 percent fall in November.

The contraction was partly driven by a 6 percent decline in Russian real disposable incomes, reflecting the lingering effect on household spending from inflation.

"The weakness in the construction and retail sectors right at the end of last year serve as a reminder that the recovery will be sluggish," Capital Economics said in a note.

Poor retail sales data contrast with figures earlier this month showing industrial output rose by 3.2 percent in December after increasing by 2.7 percent a month earlier.

In other data released on Wednesday, unemployment declined to 5.3 percent from 5.4 percent in November.

Economy Minister Maxim Oreshkin said earlier this month that Russian GDP could expand by 2 percent in 2017 in the absence of external shocks.

In 2016, GDP shrank by around 0.5 percent.

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