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. Last Updated: 07/27/2016

Economy Up 7.8% in 2nd Quarter

The economy expanded an annual 7.8 percent in the second quarter as demand for goods and services fueled an investment boom, the State Statistics Service said Monday.

Gross domestic product growth followed a 7.9 percent expansion in the previous three months, the service said.

Growth has exceeded 5 percent for five consecutive quarters, with annual wage growth advancing more than 13 percent every month this year, fueling demand for housing and consumer goods. The economy, the world's 10th biggest, will expand as much as 7.5 percent this year, topping a government forecast of 6.5 percent, Central Bank Deputy Chairman Alexei Ulyukayev said Thursday.

"This is very strong growth," said Vladimir Osakovsky, an economist at Aton Capital. "Domestic demand is the main driver of economic expansion. Demand for oil and gas exports is no longer the key economic driver."

Capital investment, which increased an annual 24.7 percent in July, is driving an expansion across all industries, Osakovsky said. The economy expanded 6.7 percent in 2006 to reach $1 trillion.

Economic growth is driven by manufacturing output and consumer demand, which "means that the Russian economy is undergoing diversification," Ulyukayev said.

Industrial output grew an annual 7.8 percent in July, led by manufacturing of hydraulic turbines, tractors and construction cranes.

Consumer demand fueled growth of imports from countries outside of the former Soviet Union, which increased 50 percent in the first seven months from the year-earlier period, according to the Federal Customs Service.