Bloomberg News

Russian Industry Probably Grew at Slowest Pace in Two Years

November 16, 2011

(Updates markets, ruble in fifth paragraph.)

Nov. 16 (Bloomberg) -- Russian industrial-production growth probably decelerated last month to the slowest pace since it began expanding in October 2009, a sign the broader economy may be at risk of stalling.

Factories, mines and utilities increased output 3.5 percent from a year earlier in October after a 3.9 percent gain in September, according to the median estimate of 18 economists in a Bloomberg survey. The Federal Statistics Service in Moscow is due to publish the data today or tomorrow.

Sales are shrinking at companies including Evraz Plc, the steelmaker part owned by billionaire Roman Abramovich, as global demand falters and Europe’s debt turmoil shackles credit flows. Moderating growth in Russia may prod the central bank to ease borrowing costs after gross domestic product missed economist forecasts with a 4.8 percent increase in the third quarter, according to Renaissance Capital and VTB Capital.

“Companies will be reducing stockpiles in the fourth quarter, adapting to a weaker demand outlook and unfavorable conditions abroad,” Natalia Orlova, chief economist at Moscow- based Alfa Bank, said by phone yesterday. “That means an industry slowdown will continue, dragging economic growth in the last three months of the year to 3 percent.”

Ruble, Micex

The ruble depreciated 0.2 percent to 30.6702 per dollar and was little changed at 41.5500 against the euro at 2:03 p.m. in Moscow. The 30-stock Micex Index gained 0.7 percent to 1,498.08. The benchmark ruble-denominated gauge has lost 11 percent this year, led by OAO Magnitogorsk Iron & Steel Works and OAO Mechel, the country’s largest producer of steelmaking coal, both of which plunged 57 percent.

Industrial output may slow this quarter after uncertainty on global markets hurt exporters in the previous three months, Deputy Economy Minister Andrei Klepach, who reiterated this week that gross domestic product will expand 4.1 percent in 2011, said on Oct. 26.

Russian manufacturing expanded in October for the first time since June even as the increase in new business was “muted” because of slow growth on export markets and “lackluster” domestic demand, HSBC Holding Plc said Nov. 1, citing data compiled by London-based Markit Economics.

Evraz yesterday reported that sales dropped to $4.16 billion in the third quarter from $4.48 billion in the previous three months. Mechel said Nov. 14 that coal output fell to 19.8 million metric tons in the first nine months of the year from 20.7 million tons a year earlier.

‘Adequate’ Level

The central bank left borrowing costs unchanged last month after two increases this year, saying money-market interest rates are at an “adequate” level to balance risks from inflation and an economic slowdown. Policy makers may adjust that stance to spur growth, Renaissance Capital said yesterday in a report prepared with Moscow’s New Economic School.

“The bias with which the Russian central bank operates over the next couple of months will be an easing one,” the economists wrote. “We expect to see increasing signs of this more moderate pace of economic activity on the back of weaker external demand and the completion of the inventory restocking cycle.”

--With assistance from Zoya Shilova in Moscow. Editors: Paul Abelsky, Balazs Penz

To contact the reporter on this story: Alena Chechel in Moscow at

To contact the editor responsible for this story: Balazs Penz at

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