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. Last Updated: 07/27/2016

Retail Sales See Biggest Annual Slide in Decade

Retail sales in the country fell 9.8 percent in August in their steepest annual decline in 10 years, and disposable income continued to shrink, data showed on Monday, despite some signs of revival in the economy.

On the positive side, unemployment fell to an 8-month low of 8.1 percent of the workforce from 8.3 percent in July and average wages edged up 5.4 percent on the year.

But the real stock of cash Russians can spend declined at its fastest annual rate since January, down by 6.8 percent. And the number of people without a job — 6.2 million — still remains nearly 40 percent higher than a year ago.

The sharp annual decline in retail sales compares with a consensus forecast for a more modest drop of 8.6 percent and with July's slightly revised 8.3 percent fall. Retail sales rose 1.8 percent in August from July.

The consumption and retail data indicate that Russia's once-exuberant consumerism, which contributed greatly to the country's economic boom in 2004-2007, continues to corrode.

Elina Ribakova, chief Russia economist with Citi in Moscow, said that for consumption to settle, a few more months of economic stabilization, including in real wages, were needed. She predicted that quality of life and consumer spending would improve toward the end of the year.

"The enormous fiscal stimulus will lead to improvement in industrial output, which together with the balance of payment inflows will lead to a stabilization in income," Ribakova said.

Russia has allocated 15 trillion rubles ($490 billion) to fight the economic crisis that hit a year ago and shrank the economy by a tenth in the first half of 2009. So far, the government has spent about one half of that, according to Reuters calculations based on Kremlin documents.

Ribakova also said it will be consumption that will drive Russia's short-term economic growth, as the fiscal stimulus for 2009-2010 is geared chiefly toward consumers.

The economy has grown an average of 0.5 percent a month since June, prompting Russian officials to declare that it is carefully entering a recovery phase.

However, Economy Minister Elvira Nabiullina said on Friday that the economy contracted by 10.5 percent year-on-year in August, a worse showing than in July or June.