Russia growth indicators for July deteriorated further. In particular, real wages declined 9.2% y/y from an unrevised -7.2% and revised -8.6% in June and investment fell 8.5% y/y from -7.1% in June , both were significantly worse than forecasts and the consensus. Retail sales, industrial production and unemployment improved slightly and were moderately better than forecasts.

A moderate improvement was expected in all these variables, signaling a bottoming out of the recession. Instead the data point to further worsening of the recession in Q3. However, the rate of decline will likely moderate from the steep rate in Q2 when real GDP fell 2.5% q/q, nearly double the Q1 rate of decline.

"We retain our forecast for growth to record -4.0% in 2015 and be slightly negative in 2016 (because of base effects). However, we note downside risks to our forecasts if the economy continues to deteriorate into Q4", says Barclays.

The drop in global oil prices is a factor extending the duration of Russia's recession. Imports, consumption and investment had already largely adjusted to previous declines in oil prices and the impact of sanctions. However, the renewed oil prices declines in Q3 appear to be forcing further adjustments.