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. Last Updated: 07/27/2016

Economy Recovery Continues, but Fragile

Retail sales and real disposable incomes rose on the month in October in a sign that the economy continues its climb out of recession, but higher unemployment underscored the fragility of the recovery.

Russia was hit in the second half of 2008 by a slump in oil and commodity prices, investor flight from emerging markets and the global credit crunch.

From this summer, things started to look slightly brighter for the economy, with investors returning and oil prices rising.

But domestic demand remains slack and the government does not expect gross domestic product to recover to precrisis levels before 2012.

Highlighting the need for such caution, unemployment ticked up to 7.7 percent in October, data from the Federal Statistics Service showed. That was in line with analysts' forecasts and up from September's 10-month low of 7.6 percent.

During October, diamond miner Alrosa said it could cut up to 2 percent of staff in 2010, while indebted tycoon Oleg Deripaska said all companies will continue to shed jobs.

The jobless data chimes in with lacklustre industrial output and wage arrears numbers for last month, released earlier in the week. But the unemployment rate remains well below the 5-year peak of 9.5 percent seen in February.

Other economic indicators released on Friday also pointed to the worst of the slowdown being over.

Retail sales posted their biggest month-on-month gain since March, up 3.2 percent. But compared to the year-ago period they were still down 8.5 percent, marking the ninth consecutive month of year-on-year contraction.

Real disposable incomes rose both on the month and on the year, suggesting consumers are getting a bit richer and could become more willing to splash out in the future.

Unicredit said the improvement likely reflected "slowing inflation and fading high base effects." The pick up in the jobless rate could be linked to seasonal factors, with some agriculture-related work coming to an end as winter approaches.

The year-on-year fall in capital investment was the smallest in half a year in October, while a separate release showed foreign investment in Russia picking up in the third quarter.

Investors keen to cash in on rallying oil prices have flooded into Russian stocks and the ruble, propelling them higher and prompting the Central Bank to consider possible measures to curb speculative capital inflows.