Russia Sees 6.5% Increase in Real Wages Amid Economic Slowdown
In January, Russia experienced a notable rise in real wages, with a year-on-year increase of 6.5%, as reported by preliminary data from Rosstat. This growth comes at a time when the economy is beginning to show signs of cooling, accompanied by a decline in inflation rates.
The average monthly nominal wage reached 88,981 rubles (approximately $1,056), reflecting a significant 17.1% rise compared to the same period last year. The substantial increase in nominal wages can largely be attributed to a persistent labor shortage, which has allowed wage growth to outpace inflation, currently hovering just below 10%. The reported growth in real wages indicates an improvement in the purchasing power of Russian workers when adjusted for inflation, albeit at a more moderate pace.
Despite the positive wage data, the broader economic landscape is showing signs of deceleration. According to the Economic Development Ministry, Russia's annual GDP growth fell to 0.8% in February, down from 3% in January. The ministry indicated that the fluctuations in key macroeconomic indicators for February were significantly influenced by the calendar, as February 2025 had one less day than the previous year.
Furthermore, recent Purchasing Managers' Index (PMI) reports for manufacturing and services revealed a marked slowdown within the economy during the first quarter of the year, with both indicators remaining around the neutral benchmark of 50. While this may signal a cooling business environment, it could also present opportunities for wage stability, as the Central Bank seeks to implement a soft landing for the overheating economy through non-monetary policy measures, which appear to be yielding results.
As inflation pressures subside due to the cooling economic activity, businesses are likely to retain their workforce despite the economic slowdown. Should inflation continue to decline, it may help sustain the positive trajectory of real wages, despite the overall economic challenges. However, the effectiveness of managing this balance remains uncertain.
It is important to note that inflation has not peaked yet. The latest findings from the Federal Open Market (FOM) survey indicate that public expectations regarding inflation are starting to decrease. In March, annual inflation in Russia rose to 10.24%, as reported by the Economic Development Ministry. Although non-food prices remained relatively stable, there were notable price reductions in electrical and domestic appliances. PMI panelists have also reported a decrease in price pressures, although this has not yet translated into a complete reversal of inflation trends.
