Russia's growth is driven by consumer spending and defense spending

November 2, 2026 · 17 min read · By Klaus Dormann · Original (German)

Author: Klaus Dormann

On October 28, the Federal State Statistics Service (Rosstat) released data on production trends in key economic sectors for September. According to preliminary estimates by the Ministry of Economic Development in its report “On the Current State of the Economy,” production across the entire Russian economy in September was likely 0.5% higher than a year ago. In the third quarter and in the first nine months of 2026, real gross domestic product rose by 0.6% compared with the same period last year.

The Russian government also forecasts a 0.6% increase in aggregate economic output for the full year 2026. This assessment is confirmed by the Moscow-based economic research institute “Center for Macroeconomic Analysis and Short-term Forecasting” (CMASF). In a forecast for 2026 published on October 30, the center now expects economic growth of between 0.5% and 0.7%.

The 0.5% growth in September was driven primarily by defense contracts for industry and consumer spending. Industrial production rose by a total of 1.8% in September compared to September 2025. The annual increase in total sales in retail, services, and the restaurant industry, as calculated by the Ministry of Economic Affairs, accelerated to 3.6% in real terms in September (August: 2.9%).

How has production in key sectors developed through September?

From January through September, real retail sales in particular rose sharply compared with the previous year (+5%). Private consumer spending thus supported the modest growth of the overall economy.

Industrial production, on the other hand, remained virtually flat overall in the first nine months compared with the previous year, rising by only 0.2%. Production in the “Mining” sector fell by 1.3%. Production in the “manufacturing” sector was, however, still 1% higher from January through September than in the previous year, even though production of “coke and petroleum products” fell by 11% due to damage to production facilities caused by attacks from Ukraine.

According to TASS, growth in “manufacturing” production was driven primarily by production for military purposes. The highest annual growth rates for the period from January through September were recorded in the following “defense-related” sectors:

Other transportation vehicles and equipment (including aircraft and shipbuilding): +19.9%
Metal products (excluding machinery and equipment): +12.1%
Pharmaceuticals, materials for medical purposes: +10.3%
Computers, electronic, and optical products: +9.1%

Unexpectedly Strong Growth in the Manufacturing Sector in September

In September, production in the “manufacturing sector” performed significantly better than before. It rose by 5.6% year-over-year, following a 0.5% decline in August. The largest contributor to this was the machinery sector, where growth accelerated sharply from 6.2% to 21.3% (Kommersant). On the other hand, the decline in mining production deepened to 4.1% in September.

Overall, industrial production growth reached 1.8% in September. Analysts, however, had expected not an increase but a 0.1% decline (following a 0.6% decline in August, Finmarket.ru).

Production in key sectors in September and year-over-year change since January
, in percent

Tabelle: Veränderung der Produktion in Russland im September 2026 und von Januar bis September 2026 gegenüber Vorjahr – Industrie, Bergbau, Verarbeitendes Gewerbe, Großhandel, Transport, Bau, Landwirtschaft

Sources: Rosstat, Ministry of Economic Development of the Russian Federation; Finmarket.ru, Oct. 28, 26

Real wholesale sales fell by 1.9% in September, following a 0.5% decline in August (up 0.4% for the January–September period).

Freight volume in the transportation sector rose by 2.2% year-over-year in September, following a 4.2% increase in August. However, in the first nine months, it was only 0.4% higher than in 2025.

Construction output rose by 2.6% in September, following a 2.7% increase in August. Since the beginning of the year, however, it has fallen by 2.1%.

Agricultural output fell by 12.3% year-over-year in September, following a 6.6% increase in August. This trend in agriculture is considered the main reason why annual growth in total economic output slowed from 0.8% in August to 0.5% in September (Finmarket.ru). From January through September, agricultural production was 2.6% lower than in 2025; in the third quarter, it fell by 3.9% compared with the same period last year.

This is how strongly industrial production has recovered so far

Industrial production plummeted sharply following a strong surge at the end of 2025. This is shown in the following chart from the Russian Telegram channel “Harte Zahlen,” a regular participant in the Central Bank’s analyst surveys. Through August, industrial production had declined on a seasonally adjusted basis. In September, however, according to calculations by “Hard Numbers,” it rose by 1.2% on a seasonally adjusted basis compared to the previous month. It has not yet returned to its long-term trend line, however.

Total Industrial Production Index (Jan. 2015 = 1)
Telegram channel “Hard Numbers”

Grafik: Index der russischen Industrieproduktion insgesamt seit Januar 2015 mit Trendlinie (HP-Filter), Telegram-Kanal Harte Zahlen

Harte Zahlen: Industrial Production in September: Specific Sectors on the Rise, Oct. 28, 26

Production in the “manufacturing sector” fared significantly better than overall industrial production. The following figure shows that the “manufacturing” production index remained virtually flat from the beginning of 2026 through August. A sharp 3% increase in September compared to August has now brought the index back in line with its “trend line.”

"Manufacturing" Production Index (Jan. 2015 = 1)
Telegram channel “Hard Numbers”

Grafik: Index der Produktion des Verarbeitenden Gewerbes in Russland seit Januar 2015 mit Trendlinie (HP-Filter), Telegram-Kanal Harte Zahlen

Hard Numbers: Industrial Production in September: Specific Sectors on the Rise, Oct. 28, 26

The CMASF is expected to publish its monthly report on industrial production trends for September this week. It includes a comparison of the CMASF’s calculations on the seasonally adjusted trend in industrial production with Rosstat’s calculations (CMASF report for August).

How Incomes and Private Consumption Are Trending

Kommersant summarized the current trends in income and private consumption as follows:

Consumer demand strengthened significantly in September. According to estimates from the Ministry of Economic Development, total sales in retail, services, and the restaurant industry rose by 3.6% in real terms year-over-year in September, up from 2.9% in August. Annual growth rates increased in all three sectors, but most notably in the food service sector.

Retail sales rose by 3.9% in real terms year-over-year in September (+5% for the January–September period).

Indicators of private consumption and wage trends
: Year-over-year change in percent

Tabelle: Reale Umsätze im russischen Einzelhandel, bei Dienstleistungen und in der Gastronomie im September 2026 sowie Nominal- und Reallöhne im August 2026 gegenüber Vorjahr

Sources: Rosstat, Ministry of Economic Development of the Russian Federation; Kommersant, Oct. 29, 26

The increase in real wages stabilized at 3.3% in August. From January through August, real wages were 5.8% higher than a year ago.

According to Rosstat, the annual growth in real disposable income accelerated from 3% in the second quarter to 3.4% in the third quarter.

Households spent the largest portion of their income on goods and services (75.2% compared with 71.6% the previous year). The share allocated to savings fell from 11.4% to 8.6%.

Raiffeisenbank: A Decline in Consumer Spending Would Be Surprising

Moscow-based Raiffeisenbank notes, regarding the current trend in private consumption indicators, that there are so far no signs of a sustained slowdown in consumer activity. In summary, the bank reports:

Consumer spending picked up again in September thanks to rising incomes.

In recent months, however, there has been a slowdown in retail sales growth (and even a decline in August). In September, however, the seasonally adjusted increase in consumer spending in the retail sector reached a level of +0.3 to +0.4% compared to the previous month. This corresponds to the average growth rate of the previous year (see the dark gray line in the left-hand chart below).

At the same time, trends in individual components of consumer spending remain extremely varied. For example, in September, sales of clothing and footwear, electronics and household appliances, medications, and some food items fell for the second consecutive month.

Real disposable income rose by a solid 4% in both the second and third quarters compared with the previous quarter, after having fallen significantly in the first quarter compared with the second quarter (see the gray bars in the chart on the right).

Compared with the same quarter of the previous year, the increase in real disposable income accelerated to 3.4% in the third quarter. It was roughly twice as strong as in the first and second quarters (see turquoise squares in the chart on the right).

Retail Sales Trends and Real Disposable Income
Consumer spending is rising again (left) … which is not surprising given the accelerated income growth (right)

Grafik der Raiffeisenbank: links saisonbereinigte Veränderung des realen Einzelhandelsumsatzes in Russland gegenüber Vormonat, rechts Veränderung der real verfügbaren Einkommen gegenüber Vorquartal und Vorjahresquartal

Raiffeisenbank: Consumer spending picked up again in September thanks to higher incomes, Oct. 30, 26

In the left-hand chart, the dark gray line shows the percentage change in seasonally adjusted total real retail sales compared to the previous month. The turquoise line shows the percentage change in seasonally adjusted real retail sales, excluding automotive sales, compared to the previous month.

In the chart on the right, the gray bars show the percentage change in seasonally adjusted real disposable income of the population compared to the previous quarter. The turquoise squares show the percentage increase in real disposable income compared to the same quarter of the previous year.

Russia's growth is driven by consumer spending and defense spending

How has production in key sectors developed through September?

Unexpectedly Strong Growth in the Manufacturing Sector in September

This is how strongly industrial production has recovered so far

How Incomes and Private Consumption Are Trending

Raiffeisenbank: A Decline in Consumer Spending Would Be Surprising

Recommended Reading

German-Russian Chamber of Foreign Trade:

Overall Economy (Austrian Chamber of Commerce: Russia Country Profile, as of Oct. 2026; TradingEconomics: News; Calendar; Kommersant, Vedomosti, Politkom, inveb.ru, Finam)

Economic Forecasts

Monetary Policy, Inflation (Central Bank calendar; Interfax reports, Kommersant reports)

Fiscal Policy; Federal Budget (Interfax Reports)

Energy Sector, Fuel Supply, Infrastructure (DW in Russian: Fuel Crisis)

Foreign Trade, Sanctions; Tagesschau: Sanctions Against Russia

Political Landscape; BR24: Russia