Russian unemployment reached another record low of 2.6% in April, according to the latest data from RosStat, down by 0.1 percentage points month on month, and being yet another sign of the continuous economic overheating. (chart)

As followed closely by bne IntelliNews, in the wake of the full-scale military invasion of Ukraine, mobilisation and the brain drain it has caused, Russia faces a mounting labour crisis as worker shortages grow and the labour market shows the lowest number of young workers since the early 1990s.

At the same time real wages in March continued to outpace inflation, growing by 12.9% year on year in real terms and by 21.6% in nominal terms. Inflation accelerated to 8.2% y/y as of June 3 RosStat and the Ministry of Economic Development and Trade estimated.

GDP in April grew by 4.4% y/y after 4.2% in March and by 0.2% m/m, excluding seasonality, the ministry said. GDP already grew 5.1% y/y in January-April 2025, compared with 3.6% for the whole of 2023. 

“The economy is still running too hot, which is adding to the central bank’s challenges in tackling inflation. Further interest rate hikes are likely, including the potential for a 100 basis point hike at the next meeting on Friday [June 7] (to 17.00%),” Capital Economics commented.

While the data point to only a slight slowdown in economic growth this year, the continued labour market tightness remains an argument for additional policy tightening by the CBR, Renaissance Capital analysts agree.

Still, there were some signs of softer activity, with retail sales growth slowing from 11.1% y/y in March to 8.3% in April, which was weaker than expected (consensus expectation 10.0% y/y). Industrial production growth slowed down slightly from 4% y/y in March to 3.9%. This was due to a decline in extraction, while manufacturing growth accelerated to 8.3% y/y. 

Capital Economics also reminds that the output index of the manufacturing PMI for May came in near multi-year highs, and the CBR-compiled confidence indicator hit a decade-high in May. “Our provisional forecast is that GDP growth slows from 5.4% y/y in Q1 to 4.7% in Q2,” Capital Economics believes, while arguing that “the economy looks on track for GDP growth of 4.0% this year”.