Russia's recession isn't over

Grigory Dukor/Reuters

Russia's economy shrank.

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.

"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."

Grigory Dukor/Reuters

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.

"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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