Russia's recession still isn't over

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Grigory Dukor/Reuters

Russia's economy shrank.

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Preliminary estimates from the Federal State Statistics Services show that Russian GDP contracted by 0.4% year-over-year in the third quarter.

Economists had forecast a drop of 0.5%, according to the Bloomberg consensus.

Monday's reading marks the smallest drop in seven quarters, and was a slight improvement from the prior quarter's 0.6% contraction.

The GDP figure is consistent with a "very shallow" seasonally-adjusted drop of about 0.2% quarter-over-quarter, according to estimates from William Jackson, senior emerging markets economist at Capital Economics.

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"That serves to highlight that, even though GDP fell at a shallower pace in year-over-year terms last quarter, the Russian economy remains extremely fragile," he wrote in a note to clients.

Monthly activity data "shallower fall in GDP in year-over-year terms was supported by easing contractions in the retail and construction sectors," he added. "Those were partially offset by a fresh slump in the industrial sector."

russia gdp

Capital Economics

A few weeks back, the Central Bank of Russia once again held rates at 10.00%, which did not come as a surprise given that it previously said it was done easing until 2017.

The policy makers adopted a somewhat pessimistic tone in their accompanying statement, writing that temporary factors (including the "good harvest") were behind the falling inflation rate.

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"For now, we continue to think that the Russian economy will return to positive growth around the turn of the year, with GDP growth likely to average around 1.3- 1.5% over 2017 as a whole," added Jackson in Monday's note.

The Russian ruble is down by about 0.7% at 66.2118 per dollar as of 9:02 a.m. ET, while Brent crude oil is down by 1.0% at $44.29 per barrel.

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