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Russian consumers are benefiting from a stronger ruble that’s boosted incomes and offset tight credit while a lack of investment is hampering a rebound in manufacturing, a series of economic reports showed today.

Real disposable incomes posted the biggest jump in more than a year last month and retail sales rose from September, signaling consumer demand is returning following October’s 3.4 percent gain in the ruble against the dollar.

The economy of the world’s biggest energy producer is showing signs of recovery as a return of global demand for commodities supported exporters and domestic demand rebounded after the ruble gained to the strongest level this year. Russia’s record 10.9 percent economic contraction in the second quarter eased to an 8.9 percent decline last quarter.

“Household consumption is stabilizing after lagging behind the rest of the economy,” said Olga Naydenova, an economist at Otkritie Financial Corp. in Moscow. She expected a broader improvement in indicators last month as “people have learned to adapt to the changing situation, and budget spending on social needs also helped.”

The ruble lost 0.8 percent to 29.0506 per dollar at 4:22 p.m. in Moscow, paring its weekly gain against the U.S. currency to 0.6 percent. The ruble slid 0.5 percent to 35.3348 against the central bank’s target currency basket.

Retailer Gains

OAO Dixy Group, Russia’s third-largest publicly traded food retailer, added 4.62 rubles, or 2.1 percent, to 219.99 rubles in Moscow. The stock has gained 323 percent so far this year. The shares of X5 Retail Group NV and OAO Magnit, Russia’s two biggest food retailers, are up 234 percent and 274 percent in 2009, outperforming the 30-stock Micex Index, which has jumped 114 percent this year.

Disposable incomes climbed a monthly 6 percent in October and rose 3.9 percent compared with the same period last year, the biggest annual jump since September 2008, the Federal Statistics Service said. Retail sales rose 3.2 percent from September and declined 8.5 percent on an annual basis compared with a 9.9 percent drop the month before.

The government has made spending on social needs, including benefits and pensions, a priority of its stimulus program, which deployed 2.5 trillion rubles ($86.4 billion) to bolster the economy with tax breaks, loan guarantees and subsidies.

‘Too Early’

Service industries, which account for about 40 percent of the economy, rose for a third month in October, advancing to the highest since September 2008, VTB Capital said on Nov. 5, citing its Purchasing Managers’ Index.

“Although the economy is no longer declining, it is too early to speak of a recovery,” Alfa Bank analysts led by Ekaterina Leonova said in a Nov. 18 report. “Signs of improvement are still very fragile and do not constitute a trend.”

The ruble appreciated 3.4 percent against the dollar for its second consecutive monthly gain in October. Imports account for about 49 percent of the consumer goods sold in Russia, the government estimated last year.

A stronger currency has increased spending power for the domestic market as “it transfers incomes into people’s pockets,” said Clemens Grafe, chief economist at UBS in Moscow.

Wage declines also eased last month as exporters returned to profitability. Wages fell an annual 4.5 percent in October, compared with a 4.9 percent decline the previous month. Retail sales have fallen for nine consecutive months, the longest period of declines on record.

Manufacturing Slump

Rebounding consumer demand isn’t reflected in the country’s manufacturing sector. Russia’s industrial slump deepened in October as companies failed to build up inventories and credit remained tight even after eight central bank interest rate cuts since April.

Output in October fell 11.2 percent from a year earlier after the decline eased to 9.5 percent in September. Manufacturers are struggling to stay profitable as banks rein in credit, hampering investment even as demand picks up for commodities, Russia’s chief export.

“High interest rates and sharp ruble appreciation may have added pressure to the competitiveness of Russian goods,” said Anton Nikitin, an analyst at Renaissance Capital in Moscow. “In this environment, fourth-quarter GDP growth might be weaker than we previously thought.”

Shrinking output may spur the central bank to further loosen monetary policy, Nikitin said.

Bank Rossii is scheduled to hold a board meeting on Nov. 24 where a rate decision may be discussed, First Deputy Chairman Alexei Ulyukayev said yesterday.

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