Bloomberg News

Russian Industrial Output Growth Unexpectedly Slows

January 23, 2013

Russian industrial production unexpectedly slowed in December to the weakest pace in eight months, showing the slumping economy failed to pick up momentum last quarter.

Output at factories, mines and utilities rose 1.4 percent from a year earlier, the slowest pace since April, compared with 1.9 percent in November, the Federal Statistics Service in Moscow said today in an e-mailed statement. The median estimate of 17 economists in a Bloomberg survey was for a 2 percent advance.

Industrial output in the world’s largest energy exporter is stabilizing at weak levels as the economy cools, the central bank said this month. Stagnating output may support the government’s calls for monetary stimulus and cheaper money to boost growth, which was the weakest in the third quarter on an annual basis since the recovery from a recession began in 2010.

“With the important exception of oil, external demand is weak,” Jacob Nell, chief economist for Russia at Morgan Stanley (MS:US) in Moscow, said by e-mail before the report. “Fears of a return of a second wave of the crisis are keeping domestic consumers and businesses cautious.”

Economic growth slowed to 2.4 percent in the fourth quarter compared with the same period a year earlier from 2.9 percent in July-September, according to the median estimate of 15 economists in a Bloomberg survey. The government should seek to increase growth to a stable 5 percent pace, Prime Minister Dmitry Medvedev told a conference in Moscow last week.

Rate Arguments

Bank Rossii removed guidance from its interest-rates statement this month, a sign that it may either raise or lower borrowing costs as soon as February, according to First Deputy Chairman Alexei Ulyukayev.

The central bank doesn’t think monetary easing is appropriate to boost the economy now, while Cabinet officials including First Deputy Prime Minister Igor Shuvalov and Finance Minister Anton Siluanov have called for lower borrowing costs to jump-start growth.

Natural-resources output expanded 0.2 percent from a year earlier in December, while manufacturing growth eased to 1.5 percent from 4 percent in November, the statistics service said. Output at utilities grew 4.7 percent after contracting the previous three months.

Sales of cars and light vehicles grew by 1 percent in December compared with a year earlier, down from last year’s high of 25 percent in February, according to the Association of European Businesses in Russia. Sales at OAO AvtoVAZ, the country’s biggest carmaker, were flat in December compared with a year earlier and fell 7 percent during all of 2012, the committee said Jan. 15.

Company Doubts

“Industrial-production growth was weak at the end of the year, and the slowdown of corporate-lending growth to 13 percent suggests that,” Dmitry Dolgin, an economist at Alfa Bank in Moscow, said by e-mail before the release. “Companies have doubts about the stability of domestic demand and the prospects for global economic growth.”

The price for Urals crude, Russia’s main export blend, has advanced 1.7 percent this year to $111.61 a barrel. The country’s biggest export earner averaged $110.27 a barrel last year, according to data compiled by Bloomberg.

The economy’s “soft patch” probably weighed on industrial output in December, a trend that will probably remain throughout the first quarter, said Ivan Tchakarov, chief economist for Russia at Renaissance Capital in Moscow.

“Investment has been weak in 2012 because of the political cycle and external uncertainty,” he said by e-mail before the release. “Investment will recover strongly in 2013 as the global backdrop will be better and global economy firmer.”

To contact the reporter on this story: Scott Rose in Moscow at rrose10@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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