Russia Investment Boom Continues

Rosstat, the Russian state statistics service, issued a preliminary financial report on January 2008 yesterday. Economists say that the report indicates that the investment and consumption boom in Russia continues, in spite of the worsening world economic situation. A slight slowdown in retail cam be attributed to the ling holidays that month.

The volume of investment in January 2007 was up 19 percent, to 354.9 billion rubles, in comparison with January 2007. That month last year saw record growth of 26.9 percent over January 2006. January's industrial production was up 4.8 percent over the previous January.

Disposal income in January of this year rose 12.9 percent (nominally 28.5 percent) over last January, to 10,641 rubles. Real salaries rose 15.8 percent. These increases are fueling the consumption boom that has seized Russia. Retail turnover in January rose 14.1 percent to 911.6 billion rubles. Foodstuffs made up 45.1 percent of retail trade turnover in January 2008, down from 45.4 percent a year ago. Deputy Minister of Economic development and Trade Andrey Belousov reported yesterday that GDP growth in January was 7.4 percent.

While as reported yesterday The index of Russia’s manufacturers’ prices soared 25.2 percent on year in January, RIA Novosti reported the data of Federal Statistics Service. The growth in manufacturers’ prices was twice as much as the increase in consumer prices (12.6 percent). The prices of manufacturers gained 3.7 percent in January vs. December of 2007.

In the fuel and energy sector, coal and peat prices jumped 13.4 percent and the prices for crude oil and accompanying gas gained 4.3 percent. At the same time, the decline of 13.2 percent was noted in extraction of non-ferrous metal ores and the prices for certain oil products went down as well. The prices for residual oil, for instance, shed 5.6 percent, petrol prices lost 4.5 percent.

When it comes to processing industries, the prices of chemical production were fueled by the 15.5-percent increase in prices for other basic inorganic chemicals, the 12.8-percent growth in prices for fertilizers and nitrogen compounds, the 8.0-percent growth in prices for plant protection chemicals (pesticides) and other agrochemical products and the 6.5-percnet growth in prices for basic chemicals.


Meantime the prices of flats in Moscow continue to manifest skyrocketing growth. They surged nearly 10 percent between January to February, Vedomosti reported Thursday, pointing out that the analysts haven’t arrived at some common conclusion yet.

The figures are different. Some say the average price for a square meter in Moscow grew by roughly 7.8 percent from January 1, having climbed from $4,438 to $4,783 (the ruble growth was 7.9 percent, from 108,936 rubles to 117,595 rubles). But others speak of the 8,500-ruble increase from January 1, pointing out that, for some flats, the prices stepped up 15 percent in three weeks of February.

The increase covered all segments. Economy flats cost 7 percent more now, business class gained 6.7 percent and elite real estate increased 6 percent. The growth was above 15 percent in some parts of Moscow (one-/two-room flats in Zelenograd, South-East and North-West Districts).

The one-roomed flats are the obvious leaders with the prices soaring up to 20 percent. An ordinary flat with a room of 35,000 square meters cost $160,000 before the New Year, but the current price is $190,000.

Realtors give different reasons for this increase, ranging from the surge in demand and reduction in supply of secondary flats and tougher conditions for mortgage crediting to the general shift of investors from stock markets to the market of real estate.

Also the number of economically active Russians reached 75.3 million last year. The employment growth drove the unemployment level down to an unusually low level, and the increase in employment accounted for a roughly a third of economic growth. Russia had 9.4 million unemployed in 1999, 6.2 million in 2003, 5.6 million in 2005 and reached the record low of 4.6 million in 2007.