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Russia's economic growth slows in early 2019, real incomes in focus

A view shows Russian rouble coins in this picture illustration taken October 26, 2018. Picture taken October 26, 2018. REUTERS/Maxim Shemetov (Reuters)

MOSCOW (Reuters) - Economic growth in Russia slowed in the first quarter of 2019, data showed on Thursday, bringing into focus an unexpected positive revision of real disposable incomes dynamics.

Gross domestic product (GDP) growth slowed "as expected" to 0.8 percent in year-on-year terms in the first quarter from 2.7 percent in the fourth quarter of 2018, the economy ministry said, confirming market concerns.

Questions about the durability of economic growth in Russia arose after data showed that the pace of GDP expansion had unexpectedly climbed to a six-year high in 2018. That also brought concerns about the reliability of Russia's data.

In March alone, GDP grew by 0.6 percent compared with a year ago after expanding by 1.4 percent in February, the data showed.

"The big picture is that Russian GDP growth weakened markedly over the first quarter as a whole," Capital Economics research firm said in a note.

"The pace of expansion is likely to remain soft over the coming quarters, although the consensus view on growth this year is probably too pessimistic."

The central bank said on Thursday it expected GDP to grow by up to 1.7 percent in 2019.

A data breakdown from the Federal Statistics Service showed on Thursday that retail sales, the gauge of the economy's main driver - consumer demand - rose 1.6 percent in March, down from 2.0 percent in the previous month.

Real wages, which are adjusted to inflation, were flat in March compared with a 0.7 percent rise in February and analysts' forecast of a 0.5 percent increase.

Average nominal wages earned by Russians rose 5.2 percent year-on-year to 45,000 roubles ($703) in March.

Real disposable incomes, or the money that households have after taxes and inflation are taken into account, fell 2.3 percent in the first quarter, the statistics service, or Rosstat, said.

Rosstat surprised data watchers by revising the 2018 real disposable incomes dynamics to 0.1 percent growth from a 0.1 percent decline, data showed on Thursday.

The issue of real disposable incomes was one of the most socially-sensitive lately in Russia that saw its rouble tumbling since Western sanctions and a drop in oil prices hit in 2014.

Rosstat said in March it had decided to stop publishing data on real disposable income every month and switched to quarterly publications instead, explaining the move by the need to improve the data's accuracy.

($1 = 64.0175 roubles)

(Reporting by Andrey Ostroukh; Additional reporting by Gabrielle Tétrault-Farber and Polina Nikolskaya; Editing by Andrew Cawthorne)